Free Lodged Proposed Document - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11 12

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 [email protected] [email protected] Michael L. Banks, Pro Hac Vice William J. Delany, Pro Hac Vice Amy Covert, Pro Hac Vice Azeez Hayne, Pro Hac Vice MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 Telephone: (215) 963-5000 [email protected] [email protected] [email protected] [email protected] Attorneys for Defendants

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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. (ORAL ARGUMENT REQUESTED) 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, No. CV04-0424 PHX ROS

DEFENDANTS' SUPPLEMENTAL BRIEF IN OPPOSITION TO PLAINTIFFS' MOTION FOR CLASS CERTIFICATION

Pursuant to the Court's Order, Defendants file this Supplemental Brief, which is supported by the Declarations of Dawn L. Dauphine, Craig Chapman, Maureen Rojas, Cindy Burnelko, Marie Gangone, Connie Zeller, Diane Sucharski, all filed this same date.

Case 2:04-cv-00424-ROS

Document 186

Filed 06/30/2006

Page 1 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 III. C. I. II.

TABLE OF CONTENTS Page INTRODUCTION .....................................................................................................1 ARGUMENT.............................................................................................................3 A. Ninth Circuit Precedent Establishes That Each Putative Class Member's Claims Accrued When He or She Had Actual or Constructive Knowledge of the Injuries Underlying Their Claims..........................................................3 1. The Court should reject Plaintiffs' attempt to conflate distinct claims under Sections 502(a)(3) and 502(a)(1)(B) of ERISA...............4 2. Plaintiffs' distinct claims are governed by multiple statute of limitations periods, not a single six-year period as Plaintiffs suggest ...6 3. The Court should reject Plaintiffs' attempt to fashion a self-serving accrual standard, and apply the federal "knew or should have known" accrual rule to Plaintiffs' claims.............................................8 4. The Court should reject Plaintiffs' continuing accrual argument, as it has been rejected by the Ninth Circuit ............................................11 B. Class Treatment of Plaintiffs' Claims Is Inappropriate Because Individualized Inquiries Into When Each Putative Class Member Knew or Should Have Known of the Injury Underlying His or Her Claims Predominate Over Common Issues and Render the Claims Atypical.............12 1. 2. Complaints and Inquiries by Plan Participants Regarding the SBA Offset...........................................................................14 Complaints Led the Company to Prepare Presentations Designed to Address the SBA Offset.......................................................6

Plaintiffs' Tolling Arguments Do Not Eliminate the Intractable Individual Issues Surrounding the Affirmative Defenses. ..............................................24 1. The tolling agreement does not eliminate any individualized inquiries............................................................................................25 2. Defendants were not obligated to notify Plaintiffs of their right to appeal or file a civil action until after their initial claims for benefits were denied.......................................................................................25 3. Plaintiffs' claims were not tolled for failure to provide requested documents.........................................................................................26 4. The statute of limitations was not tolled during the administrative claims process...................................................................................27 D. Defendants Adequately Preserved Their Affirmative Defenses .....................27 1. Defendants adequately preserved their affirmative defenses at the partial summary judgment stage........................................................28 2. Defendants adequately preserved their affirmative defenses at the administrative claims stage ...............................................................29 E. Defendants' Laches Argument Is Viable and Requires an Individualized Inquiry. ........................................................................................................30 CONCLUSION........................................................................................................31 Document 186 -i-Filed 06/30/2006 Page 2 of 37

Case 2:04-cv-00424-ROS

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES CASES Atwood v. Newmont Gold Co., 45 F.3d 1317 (9th Cir. 1995)..........................................14 Bellas v. CBS, Inc., 73 F. Supp. 2d 493 (W.D. Pa. 1999)..................................................6 Bennett v. Federated Mut. Ins. Co., 141 F.3d 837 (8th Cir. 1998)...................................11 Bibeau v. Pac. Nw. Research Found., Inc., 188 F.3d 1105 (9th Cir. 1999), amended 208 F.3d 831 (9th Cir. 2000) ..................................................................................9 Blanton v. Anzalone, 760 F.2d 989 (9th Cir. 1985).........................................................11 Brief of Appellee, 1994 WL 16014668, Loewy v. Ret. Comm., Plan Adm'r of the Motorola, Inc. Pension Plan, No. CV-03-2284-PHX-FJM ...................................10 Cameron v. E.M. Adams & Co., 547 F.2d 473 (9th Cir. 1976)........................................12 Caputo v. Pfizer, Inc., 267 F.3d 181 (2d Cir. 2001) ........................................................11 Carey v. Int'l Bhd. of Elec. Workers Local 363 Pension Plan, 201 F.3d 44 (2d Cir. 1999).................................................................................................11, 26 Chappel v. Lab. Corp. of Am., 232 F.3d 719 (9th Cir. 2000) ................................ 5, 25, 27 Coleman v. Pension Benefit Guar. Corp., 94 F. Supp. 2d 18 (D.D.C. 2000) .....................6 Counts v. Am. Gen. Life & Accident Ins. Co., 111 F.3d 105 (11th Cir. 1997)..................27 D'Amico v. CBS Corp., 297 F.3d 287 (3d Cir. 2002) ........................................................5 Dongelewicz v. PNC Nat'l Bank Ass'n, 2004 WL 1661863 (3d Cir. 2004) ......................13 Flanagan v. Inland Empire Elec. Workers Pension Plan & Trust, 3 F.3d 1246 (9th Cir. 1993) .....................................................................................................11 Frommert v. Conkright, 433 F.3d 254 (2d Cir. 2006) .....................................................11 Gluck v. Unisys Corp., 960 F.2d 1168 (3d Cir. 1992).......................................................7 Graphic Commc'ns Union Dist. Council No. 2 v. GCIU-Employer Ret. Benefit Plan, 917 F.2d 1184 (9th Cir. 1990) ......................................................................5, 6, 25 Great-West Life & Annuity Life Ins. Co. v. Knudson, 534 U.S. 204 (2002).....................30 Henglein v. Colt Indus. Operating Corp., 260 F.3d 201 (3d Cir. 2001) ..........................12 Johnson v. St. Frances Xavier Cabrini Hosp. of Seattle, 910 F.2d 594 (9th Cir. 1990) .....5 Loewy v. Ret. Comm., Plan Adm'r of the Motorola, Inc. Pension Plan, No. CV-032284-PHX-FJM ...................................................................................................10 Case 2:04-cv-00424-ROS Document 186 -ii-Filed 06/30/2006 Page 3 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 M-S-R Pub. Power Agency v. Bonneville Power Admin., 297 F.3d 833 (9th Cir. 2002) ....5 Martin v. Constr. Laborers Trust for S. Cal., 947 F.2d 1381 (9th Cir. 1991) ............10, 24 May v. Dep't Store Co. v. Fed. Ins. Co., 305 F.3d 597 (7th Cir. 2002)..........................4, 5 Meagher v. Int'l Ass'n of Machinists & Aerospace Workers Plan, 856 F.2d 1418 (9th Cir. 1988).................................................................................................7, 11 Mitchell v. First Unum Life Ins. Co., 65 F. Supp. 2d 686 (S.D. Ohio 1998) ....................29 N. Cal. Retail Clerks Unions & Food Employers Joint Pension Trust Fund v. Jumbo Mkts., Inc., 906 F.2d 1371 (9th Cir. 1990) .................................................. 9, 11, 27 O'Bryhim v. Reliance Standard Life Ins. Co., 997 F. Supp. 728 (E.D. Va. 1998), aff'd, 188 F.3d 502 (4th Cir. 1999) .......................................................................29 Phillips v. Alaska Hotel & Rest. Employees Pension Fund, 944 F.2d 509 (9th Cir. 1991).....................................................................................................12 Pierce County Hotel Employees & Rest. Employees Health Trust v. Elks Lodge, B.P.O.E. No. 1450, 827 F.2d 1324 (9th Cir. 1987)........................................7, 9, 11 Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326 (9th Cir. 1996) ..................... 9, 10, 11, 12 Reich v. Ladish Co., Inc., 306 F.3d 519 (7th Cir. 2002)..................................................29 Romero v. Allstate Corp., 404 F.3d 212 (3d Cir. 2005)..................................... 7, 8, 10, 11 Ross v. Rail Car Am. Group Disability Income Plan, 285 F.3d 735 (8th Cir. 2002)..........6 Sprague v. Gen. Motors Corp., 133 F.3d 388 (6th Cir. 1998) .........................................28 Stone v. Travelers Corp., 58 F.3d 434 (9th Cir. 1995) ......................................................8 Sullivan v. Chase Inv. Servs. of Boston, 79 F.R.D. 246 (N.D. Cal. 1978)........................12 Syed v. Hercules, Inc., 214 F.3d 155 (3d Cir. 2000) .......................................................10 Tahoe- Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency, 216 F.3d 764 (9th Cir. 2000) ................................................................................28 Thomas v. Oregon Fruit Prods. Co., 228 F.3d 991 (9th Cir. 2000).................................30 Tinley v. Gannett Co., 55 Fed. Appx. 74 (3d Cir. 2003) .................................................12 Union Pac. R.R. Co. v. Beckham, 138 F.3d 325 (8th Cir. 1998)......................................10 In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124 (2d Cir. 2001) .................12 Veltri v. Bldg. Serv. 32B-J Pension Funda, 393 F.3d 318 (2d Cir. 2004)..................25, 26 Waste Mgmt.t Holdings, Inc. v. Mowbray, 208 F.3d 288 (1st Cir. 2000).........................12 Case 2:04-cv-00424-ROS Document 186 -iiiFiled 06/30/2006 Page 4 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Document 186 -ivFiled 06/30/2006 Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Ins. Program, 222 F.3d 643 (9th Cir. 2000).................................................................................................8 Williams v. Sinclair, 529 F.2d 1383 (9th Cir. 1975) .......................................................12 Wright v. Heyne, 349 F.3d 321 (6th Cir. 2003)...............................................................11 Zhu v. Fujitsu Group 401(k) Plan, 2003 WL 24030329 (N.D. Cal. Sept. 9, 2003)............6 Zipf v. Am. Tel. & Tel. Co., 799 F.2d 889 (3d Cir. 1986) ..................................................5 Zotos v. Lindbergh Sch. Dist., 121 F.3d 356 (8th Cir. 1997)...........................................29 CODE AND RULES 29 U.S.C. § 1002(2).........................................................................................................8 29 U.S.C. § 1113 .............................................................................................................4 29 U.S.C. § 1132(a)(1)(B) ...............................................................................................5 29 U.S.C. § 1132(a)(3).....................................................................................................5 29 U.S.C. § 1132(a)(3)...................................................................................................30 29 U.S.C. § 1113 .............................................................................................................4 Fed. R. Civ. P. 8(c) ........................................................................................................28 Fed. R. Civ. P. 23(a) ..................................................................................................... 31

Case 2:04-cv-00424-ROS

Page 5 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

II.

INTRODUCTION Plaintiffs' Reply Memorandum confirms that Defendants' affirmative defenses,

and in particular their statute of limitations defenses, are now front and center in this lawsuit. Plaintiffs attempt to brush these defenses aside, however, by framing the analysis in an improper context ­ they make summary judgment arguments aimed at the legal sufficiency of the Named Plaintiffs' claims. Arguing for the application of erroneous legal standards and distorting facts, Plaintiffs attempt to create the impression that their claims, and thereby the claims of all members of the putative class, will ultimately survive Defendants' affirmative defenses. In doing so, Plaintiffs miss the point while, at the same time, they underscore the individual factual inquiries inherent in the case. The very need for such fact specific inquiries defeats typicality and the predominance of common issues, and thereby eliminates any arguable benefit of the class certification vehicle. Put another way, the sufficiency of the putative class members' claims do not stand or fall with those of the Named Plaintiffs. As an example of Plaintiffs' oversimplification and factual overreach, Plaintiffs argue that the statute of limitations as to all putative class members' claims did not begin to accrue until the Named Plaintiffs' administrative claims were denied. Plaintiffs' argument flies in the face of controlling precedent. Their statutory claims as well as their claims for benefits under the plans accrued when they knew or should have known of the injuries underlying their claims. Such a factual inquiry will turn on the knowledge of each Plaintiff and putative class member. In relation to their own claims, Plaintiffs suggest that Defendants failed to place them on notice of the alleged harm that supposedly flowed from the challenged plan amendments. Contrary to Plaintiffs' allegations, however, the record reveals that Defendants disclosed the salient details immediately after the plans were amended in 1983, and later engaged in a communications campaign to address the discord among some employees over the SBA offset. It is Defendants' position that the disclosures in the 1984 summary plan
1 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 6 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

description, brochures, and other plan communications put participants on notice of the facts that triggered the running of the statute of limitations. Plaintiffs disagree; it is important to note, in this regard, that Plaintiffs are the ones who invite individualized inquiries into innumerable factual variations. If, as they contend, the 1984 SPD and other plan communications were insufficient, then the unavoidable consequence is an excruciatingly detailed examination of dozens of meetings, communications, speeches and publications over the ensuing 15 or more years that address every aspect of the SBA and Social Security offsets. It must be determined which of the participants received or are deemed to have received information to put them on notice of the facts underlying their claims. Perhaps they can explain why: (1) some of the participants had enough information to assert detailed claims and challenges in 1984 and the mid-1990s, as discussed below, while others did nothing; and (2) no one filed a lawsuit before this case was commenced in 2004. Meanwhile, among the facts and histories to be examined on an individualized basis are the following, each of which reveals that many participants knew or should have known of the triggering events between 1984 and 1999: · As early as 1985, almost 100 participants signed a petition complaining about the offsets. By 1995, hundreds of participants complained that the SBA offset was a "takeaway." · The Company frequently offered presentations designed to educate participants about their benefits. One such presentation series, offered in 1995, was specifically designed to address the SBA offset. Hundreds of members of the putative class participated in these presentations, and many reacted angrily. · Participants received a multitude of statements, estimates, and calculations that demonstrated the effect of the offsets on their particular benefits, and detailed how the offsets were calculated. These statements and estimates were provided at varying times to individual members of the putative class, and in most instances were provided well outside of the limitations period. · In exit interviews, one-on-one meetings, and over a hotline, participants frequently asked benefits specialists for clarification about how the offsets were calculated. Many of these conversations likewise occurred well outside the limitations period. · Certain members of the putative class filed multiple administrative claims
2 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 7 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

challenging the offsets as early as 1985 and 1993. · Numerous putative class members sought advice of counsel, some at least as early as 1995, regarding their belief that the SBA offset was illegal. Indeed, one lawyer responded to an inquiry with concern that the statute of limitations had already run on any such claims. · Many class members complained about the offsets to government agencies. For example, one group of over 100 putative class members directly challenged that the SBA and Social Security offsets violated ERISA. These examples demonstrate the range of events and documents that must be explored on a person-by-person basis to resolve each plan participant's claims. Such individualized inquiries also apply to Defendants' other defenses, such as laches, for which individualized determinations of knowledge and any legitimate reasons for delay in taking action are necessary. (See Defs.' Opp. To Mot. Class Cert. at 15-19.) These facts can be examined for the six Named Plaintiffs, but there is no realistic way to conclude such an analysis for more than 10,000 putative class members. Thus, for the reasons set forth below, and in Defendants' Response Memorandum, the Court should deny Plaintiffs' motion for class certification.
III.

ARGUMENT
A.

Ninth Circuit Precedent Establishes That Each Putative Class Member's Claims Accrued When He or She Had Actual or Constructive Knowledge of the Injuries Underlying Their Claims.

Defendants demonstrated in their opening brief that the statute of limitations governing Plaintiffs' statutory claims began to run when Plaintiffs knew or should have known of the supposed reductions in their accrued benefits. Likewise, Plaintiffs' claims for benefits began to run when they knew or should have known of a clear repudiation of the obligation to pay benefits in the manner sought by Plaintiffs, regardless of whether or when administrative claims were filed or denied. Determining when the statutes of limitations accrued under these standards is a fact-intensive inquiry that can be decided only on an individualized basis. Plaintiffs now contend that none of their claims accrued until their administrative claims were filed and denied. In order to make this strained argument, Plaintiffs conflate
3 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 8 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

two distinct types of ERISA claims: claims for alleged statutory violations under ERISA § 502(a)(3), and claims for benefits based on the terms of the plan under ERISA § 502(a)(1)(B). Based on this untenable premise, Plaintiffs argue that all of their claims are for benefits to be paid under the terms of the plans, and that the claims accrued only when their administrative claims were denied. This argument founders upon contrary Ninth Circuit precedent, and directly contradicts Plaintiffs' prior arguments. Indeed, the "knew or should have known" accrual rule governs Plaintiffs' claims, and requires individualized inquiries. Plaintiffs argue in the alternative that their claims did not accrue until they had a heightened version of "actual knowledge" of their claims. They base this argument, however, on cases interpreting ERISA Section 413, 29 U.S.C. § 1113, which applies only to claims for breaches of fiduciary duty. There are no such claims in this case. Plaintiffs also argue that a separate claim and limitations period accrued with each pension check calculated under the challenged amendments. The Ninth Circuit, however, specifically rejected this argument under circumstances indistinguishable from the instant case. The Court, therefore, should reject Plaintiffs' attempts to deviate from the rule in this Circuit relating to the accrual of claims for statutory violations of ERISA.
1.

The Court should reject Plaintiffs' attempt to conflate distinct claims under Sections 502(a)(3) and 502(a)(1)(B) of ERISA.

Plaintiffs argue that their claims for violation of ERISA's anti-cutback rule are actually claims to enforce the terms of the plan. They essentially contend that all claims based on statutory requirements can be recast as claims for plan benefits because ERISA plans incorporate ERISA's provisions by implication. (Pls.' Rpy. Br. at 6-7 (citing May Dep't Stores Co. v. Fed. Ins. Co., 305 F.3d 597 (7th Cir. 2002)).) In the same vein, Plaintiffs argue that, because their anti-cutback claims rely to some extent on the preamendment terms of the plan, they seek to "enforce rights under a pension plan." (Id.) Plaintiffs are wrong for a number of reasons. It is well established that statutory claims and claims for benefits under the terms of
4 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 9 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

a plan are wholly separate claims that arise under distinct statutory enforcement provisions.1 The Ninth Circuit has recognized the importance of this distinction, requiring a claimant to exhaust administrative remedies before bringing a suit for benefits under the terms of a plan, but not before bringing a suit for violations of ERISA's statutory provisions. Chappel v. Lab. Corp. of Am., 232 F.3d 719, 724 (9th Cir. 2000); Graphic Commc'ns Union Dist. Council No. 2 v. GCIU-Employer Ret. Benefit Plan, 917 F.2d 1184, 1187 (9th Cir. 1990). It is the substance of the claim, rather than the label a plaintiff chooses to affix to it, that determines the statutory enforcement provision under which it arises. See Johnson v. St. Frances Xavier Cabrini Hosp. of Seattle, 910 F.2d 594, 596 (9th Cir. 1990) (noting that the "key question is whether the answer settling the dispute `is to be found in the [plan] or in ERISA's provisions"); accord D'Amico v. CBS Corp., 297 F.3d 287, 291 (3d Cir. 2002) (holding that the question is whether "resolution of the claims rests upon an interpretation of an ERISA-regulated plan rather than on an interpretation and application of ERISA itself").2 In its July 19, 2005 Order, the Court found that Plaintiffs' anti-cutback claims were "statutory claims," and determined that "[i]nterpretation of ERISA, a federal statute, is a question of law subject to de novo review." (Doc. # 73, at 12.) Plaintiffs' attempt to
1

Adopting Plaintiffs' argument would also render important provisions of the statute meaningless. Citing May, Plaintiffs argue that every plan implicitly contains every ERISA provision. Yet, ERISA specifically distinguishes between claims brought to enforce the terms of the plan, see 29 U.S.C. § 1132(a)(1)(B), and claims brought to enforce ERISA's provisions. See 29 U.S.C. § 1132(a)(3). Plaintiffs' argument would render Section 502(a)(3) mere surplusage, and should be rejected. See, e.g., M-S-R Pub. Power Agency v. Bonneville Power Admin., 297 F.3d 833, 844 (9th Cir. 2002) (rejecting proposed statutory interpretation that would render statutory provision "mere surplusage"). Plaintiffs' reliance on May is misplaced. May addressed the proper interpretation of an exclusion from an insurance contract, not ERISA's enforcement provisions. 305 F.3d at 600. The Seventh Circuit's pronouncements regarding ERISA's enforcement provisions are merely dicta, which this Court need not, and should not, follow, because to do so would effectively convert all statutory claims into claims for plan benefits. This result is inconsistent with ERISA's plain terms and established principles of statutory construction. It is also inconsistent with the Ninth Circuit's well-established rule that statutory claims need not be administratively exhausted, while claims for benefits under the terms of the plan must be. Chappel, 232 F.3d at 724; Graphic, 917 F.2d at 1187; see also Zipf v. Am. Tel. & Tel. Co., 799 F.2d 889, 891 (3d Cir. 1986) (noting that the Seventh Circuit's rule on exhaustion of statutory claims is contrary to the Ninth Circuit's rule).

2

23 24 25 26 27 28

5 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 10 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

merge their statutory claims and claims for benefits under the terms of the plan would contravene this basic premise, which has provided the framework under which this case has been litigated for the last ten months.3 See Graphic, 917 F.2d at 1188 n.6 (claim that plan provision violated ERISA alleges a violation of the statute); Ross v. Rail Car Am. Group Disability Income Plan, 285 F.3d 735, 740-41 (8th Cir. 2002) (claims that "seek to invalidate [] amendments can only be characterized as arising under 29 U.S.C. § 1132(a)(3), section 502(a)(3) of ERISA"). See also Coleman v. Pension Benefit Guar. Corp., 94 F. Supp. 2d 18, 21 (D.D.C. 2000) (characterizing ERISA § 204(g) claim as asserting a statutory violation, not a claim for benefits under the terms of a plan); Bellas v. CBS, Inc., 73 F. Supp. 2d 493, 497 (W.D. Pa. 1999) (rejecting argument that ERISA § 204(g) claim was for benefits under the plan, rather than a claim for a statutory violation); Zhu v. Fujitsu Group 401(k) Plan, 2003 WL 24030329, at *2-3 (N.D. Cal. Sept. 9, 2003) (claim to invalidate amendment based on ERISA § 203(c)(1)(B) did not seek to enforce terms of the plan, but asserted statutory claim under § 502(a)(3)).
2.

Plaintiffs' distinct claims are governed by multiple statute of limitations periods, not a single six-year period as Plaintiffs suggest.

In their opening brief, Defendants did not argue that any specific statute of limitations period governed Plaintiffs' claims, because the Court need not decide this question in order to rule on the motion for class certification. Rather, the critical questions are when the limitations period accrued, and whether the time of accrual differs for the plan participants based on their degree of knowledge of the implications of the challenged plan amendments. Nevertheless, some discussion of the appropriate limitations period is probably useful to put this dispute in its proper context.
3

Plaintiffs' current attempt to blur the distinction between their claims is also directly contrary to the arguments they made during the administrative claims process, when Plaintiffs emphasized that they were not required to exhaust their "legal claims for violations of ERISA . . . before filing suit." (Doc. # 16 at HW0000447 (emphasis added); see also Doc. # 16 at HW0000494 n.6 ("We are discussing ERISA violations on this appeal as we did in the Claim Letters in an effort to resolve the claims without resort to litigation. Our inclusion of legal issues is without waiver or prejudice to our position that there is no requirement to exhaust administrative remedies on legal issues.") (emphasis added).)

6 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 11 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

ERISA does not provide a statute of limitations for claims that do not involve breaches of fiduciary duty. Romero v. Allstate Corp., 404 F.3d 212, 220 (3d Cir. 2005); see also Pierce County Hotel Employees & Rest. Employees Health Trust v. Elks Lodge, B.P.O.E. No. 1450, 827 F.2d 1324, 1328 (9th Cir. 1987). As a result, federal courts borrow and apply the most analogous state statute of limitations to such claims. See, e.g., Pierce, 827 F.2d at 1328. In their reply, Plaintiffs assert that Arizona's six-year statute of limitations for actions based on contracts signed within the state governs all of their claims. (Pls.' Rpy. Br. at 5.) They are mistaken. The Ninth Circuit has never decided which state statute of limitations is most analogous to an anti-cutback claim under Section 204(g) of ERISA. Cf. Meagher v. Int'l Ass'n of Machinists & Aerospace Workers Plan, 856 F.2d 1418 (9th Cir. 1988)(applying ERISA § 413 limitations clause to breach of fiduciary duty claim based on failure to correct prior anti-cutback violation). At least one other appellate court, however, has addressed this exact question twice. See Romero, 404 F.3d at 220 (applying Pennsylvania's catchall statute of limitations to § 204(g) claim); Gluck v. Unisys Corp., 960 F.2d 1168, 1181-82 (3d Cir. 1992) (same). In both cases, the Third Circuit rejected the use of Pennsylvania's contract statute of limitations, and held that, because an ERISA § 204(g) claim, which involves "complex issues of statutory interpretation, had no counterpart in Pennsylvania law," Pennsylvania's "catchall" statute of limitations applied. Romero, 404 F.3d at 220 (quoting Gluck, 960 F.2d at 1181-82). Consistent with the analysis of Romero and Gluck, Defendants submit that Plaintiffs' anti-cutback claims in this case should be subject to Arizona's one-year statute of limitations for actions upon "a liability created by statute, other than a penalty or forfeiture." See ARS § 12-541(5). Alternatively, Arizona's four-year general limitations period should apply. See ARS § 12550. Plaintiffs' claims based on the terms of the plans, on the other hand, would be governed by the appropriate contract statute of limitations. See Wetzel v. Lou Ehlers
7 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 12 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Cadillac Group Long Term Disability Ins. Program, 222 F.3d 643, 648 (9th Cir. 2000) (en banc) (finding California's contract statute of limitations most analogous to claim for benefits). Arizona has three contract statutes of limitation. See ARS §§ 12-541(3), 12544(3); 12-548. The Ninth Circuit has not yet decided which one of these statutes is most analogous to a claim for benefits. Defendants submit that Arizona's one-year statute of limitations for "breach of an oral or written employment contract . . . ," ARS § 12-541(3), is most analogous to a claim for benefits under an "employee pension benefit plan."4 See Syed v. Hercules, Inc., 214 F.3d 155, 160-62 (3d Cir. 2000) (Alito, J.) (finding one-year contract statute specifically "covering employment disputes" to be more analogous to claim for benefits than three-year contract statute "for general actions on a promise"). 5 Finally, Plaintiffs' claims for statutory penalties under ERISA § 502(c) are governed by the one-year period in ARS § 12-541. The Ninth Circuit has held that a Section 502(c) claim is most analogous to an "action upon a liability created by statute, other than a penalty or forfeiture." See Stone v. Travelers Corp., 58 F.3d 434, 438-39 (9th Cir. 1995). Arizona's one-year statute of limitations for actions "[u]pon a liability created by statute, other than a penalty or forfeiture," therefore, governs Plaintiffs' Section 502(c) claims. See ARS § 12-541.
3.

The Court should reject Plaintiffs' attempt to fashion a selfserving accrual standard, and apply the federal "knew or should have known" accrual rule to Plaintiffs' claims.

Plaintiffs argue that their claims are governed by a novel and unsupported version of the clear repudiation standard that was triggered only when the plan administrator formally denied their administrative claims. (Pls.' Rpy. Br. at 5-7.) As a purported "fall back" position, and relying on fiduciary duty cases applying ERISA § 413, Plaintiffs
4

An "employee pension benefit plan" means "any plan . . . maintained by an employer . . . to the extent that by its express terms . . . provides retirement income to employees . . . ." 29 U.S.C. § 1002(2)(A). Alternatively, Arizona's four-year statute of limitations for actions "upon an instrument in writing executed without the state," ARS § 12-544(3), would be most analogous to Plaintiffs' claim for benefits based on the terms of the plan, which was "EXECUTED at San Diego, California . . . ." (Doc. # 16 at HW0000378.)

5

8 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 13 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

argue that "actual knowledge" of the basis for the claims is required to trigger the running of the statute of limitations. (Id. at 7-8). Plaintiffs' primary and "fall back" positions are wrong, and conflict with controlling Ninth Circuit authority. Rather, the federal "discovery rule" governs the accrual of their claims. Although state law provides the limitations period, federal common law governs when this period begins to run. See, e.g., N. Cal. Retail Clerks Unions & Food Employers Joint Pension Trust Fund v. Jumbo Mkts., Inc., 906 F.2d 1371, 1372 (9th Cir. 1990) ("Because the cause of action is federal, however, federal law determines the time at which the cause of action accrues."). In ERISA actions, as in other federal claims generally, the statute of limitations accrues "when the plaintiff knows or has reason to know of the injury that is the basis of the action." Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326, 1331 (9th Cir. 1996); Jumbo Mkts., 906 F.2d at 1372 (applying "knew or should have known" standard to ERISA § 515 claim for delinquent contributions due under the terms of a collective bargaining agreement); Pierce, 827 F.2d at 1328 (same); see also Romero, 404 F.3d at 222-23 (applying federal discovery rule to ERISA § 204(g) claims). Plaintiffs must be diligent in discovering the critical facts, and what Plaintiffs knew and when they knew it are questions of fact. See Bibeau v. Pac. Nw. Research Found., Inc., 188 F.3d 1105, 1108 (9th Cir. 1999) amended 208 F.3d 831 (9th Cir. 2000). The federal "knew or should have known" accrual standard, therefore, governs Plaintiffs' claims, including both the anti-cutback claims, see Romero, 404 F.3d at 224 (holding that the federal discovery rule applies to ERISA § 204(g) claims), and the claims for benefits under the terms of the retirement plan. Indeed, in Pisciotta, the Ninth Circuit applied the "knew or should have known" standard to bar claims for benefits under Section 502(a)(1)(B). See Pisciotta, 91 F.3d at 1331 (applying discovery rule to bar plaintiffs' claims); Brief of Appellee, 1994 WL 16014668, at *3, *30 (noting that claims

9 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 14 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

arose under § 502(a)(1)(B)).6 Consistent with the discovery rule, some courts have ruled that the statute of limitations on a claim for benefits under a plan begins to run when the plaintiff knew or should have known that "there has been a clear and continuing repudiation of rights under the pension plan." Martin v. Constr. Laborers Trust for S. Cal., 947 F.2d 1381, 1384 (9th Cir. 1991); Carey v. Int'l Bhd. of Elec. Workers Local 363 Pension Plan, 201 F.3d 44, 48 (2d Cir. 1999) (noting that the "clear repudiation" standard is "consistent with the `discovery rule'"); Bennett v. Federated Mut. Ins. Co., 141 F.3d 837, 838-39 (8th Cir. 1998) (same); Union Pac. R.R. Co. v. Beckham, 138 F.3d 325, 330 (8th Cir. 1998) (same). That standard, however, is not tied exclusively to the denial of an administrative claim for benefits. On the contrary, a claim for plan benefits can accrue before a formal claim denial, and indeed, even if the plaintiff never files a claim. See Martin, 947 F.2d at 138486; Carey, 201 F.3d at 48 (holding that benefit claim can accrue "regardless of whether the plaintiff has filed a formal application for benefits"); Beckham, 138 F.3d at 330 (same). Thus, Plaintiffs' claims are governed by the federal "discovery rule," and accrued when they knew or should have known of the injury forming the basis of the action, regardless of whether administrative claims had been asserted or denied. Pisciotta, 91 F.3d at 1331; Jumbo Mkts., 906 F.2d at 1372; Pierce, 827 F.2d at 1328; Romero, 404 F.3d at 222-23. Plaintiffs' "fall back" position ­ that the statute of limitations did not begin to run
6

Plaintiffs rely heavily on this Court's unpublished opinion in Loewy v. Ret. Comm., Plan Adm'r of the Motorola, Inc. Pension Plan, No. CV-03-2284-PHX-FJM. However, Loewy actually supports Defendants' position. See Loewy, slip. op. at 20 (applying "knew or should have known" accrual standard to plaintiff's claims). The fact that the Court rejected the defendant's statute of limitations argument in Loewy, moreover, is easily distinguishable from this case. In Loewy, the plaintiff claimed that he was entitled to an actuarial increase in his pension. The defendants argued that the plaintiff knew or should have known of his claim because: (1) he knew that he had not received a suspension of benefits notice, and (2) he received pension checks that did not include the actuarial increase he sought. (See Declaration of Dawn Dauphine at Ex. 1, p. 13.) The Court found these two facts insufficient to trigger the statute of limitations, but its decision was based on the specific facts in the record. By contrast, as discussed below, and in Defendants' opening brief, numerous communications and other sources of information provided Plaintiffs and the putative class members with actual or constructive knowledge of their claims.

10 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 15 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14

until participants gained a heightened form of "actual knowledge" ­ is equally untenable. (Pls.' Rpy. Br. at 8.) Plaintiffs base their argument on the Second Circuit's decisions in Frommert v. Conkright, 433 F.3d 254 (2d Cir. 2006), and Caputo v. Pfizer, Inc., 267 F.3d 181 (2d Cir. 2001). These courts, however, applied ERISA § 413's "actual knowledge" accrual rule, a provision that has no application here. Frommert, 433 F.3d at 272-73; Caputo, 267 F.3d at 193. "By its terms," ERISA § 413 "applies only to a claim which alleges a breach of fiduciary duty." Flanagan v. Inland Empire Elec. Workers Pension Plan & Trust, 3 F.3d 1246, 1252 (9th Cir. 1993) (holding that ERISA § 413 does not apply to claim for benefits). Plaintiffs do not assert a claim for breach of fiduciary duty (Doc. # 47), and, thus, § 413's actual knowledge requirement is inapplicable, and Frommert and Caputo are irrelevant. 7
4.

The Court should reject Plaintiffs' continuing accrual argument, as it has been rejected by the Ninth Circuit.

Plaintiffs also suggest that a continuing violation or accrual rule applies to their claims, relying on ERISA § 413 and a case applying that fiduciary statute of limitations,
15

Meagher, 856 F.2d 1418. (Pls.' Rpy. Br. at 11 n.8). Since Meagher, however, the Ninth
16

Circuit has clarified that when a series of alleged breaches are of the same kind or
17

character, a plaintiff's knowledge of one such breach commences the statute of limitations
18

running for all of them. Phillips v. Alaska Hotel & Rest. Employees Pension Fund, 944
19

F.2d 509, 520-21 (9th Cir. 1991). Plaintiffs argue that the continuing accrual rule remains
20

viable in spite of Phillips because the Phillips panel could not overrule the earlier
21

Meagher decision. Plaintiffs' argument misses the mark. Meagher's continuing accrual
22

rule was adopted in the distinguishable context of ERISA's unique statute of limitations
23 24 25 26 27 28 11 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 16 of 37
7

Moreover, even if ERISA § 413 did control Plaintiffs' claims, Frommert and Caputo would not apply. In Frommert and Caputo, the Second Circuit applied an interpretation of Section 413 that conflicts with the Ninth Circuit's construction of the statute. See Wright v. Heyne, 349 F.3d 321, 328 (6th Cir. 2003) (distinguishing the Second Circuit's "hybrid view of the actual knowledge requirement" from the Seventh, Eighth, Ninth, and Eleventh Circuits' rules). Contrary to the Second Circuit's rule, in the Ninth Circuit, a breach of fiduciary duty claim accrues under the "actual knowledge" prong of the standard when the plaintiff obtains "knowledge of the transaction that constituted the alleged violation." Blanton v. Anzalone, 760 F.2d 989, 992 (9th Cir. 1985).

1 2 3 4 5 6 7 8

applicable to breach of fiduciary duty claims, ERISA § 413. The Ninth Circuit has never applied the continuing accrual rule to ERISA claims governed by the most analogous state statute and the federal discovery rule. To the contrary, the Ninth Circuit has specifically rejected a plaintiff's attempt to do so. Pisciotta, 91 F.3d at 1332.8
B.

Class Treatment of Plaintiffs' Claims Is Inappropriate Because Individualized Inquiries Into When Each Putative Class Member Knew or Should Have Known of the Injury Underlying His or Her Claims Predominate Over Common Issues and Render the Claims Atypical.

Plaintiffs argue that individualized affirmative defenses should not prevent class certification. There is nothing unique, however, about affirmative defenses in relation to
9

Rule 23's requirements. In a case such as this, where the affirmative defenses are the
10

central remaining issue and will require individualized determinations, class certification
11

does not provide a superior method to adjudicate Plaintiffs' claims. These individualized
12 13

issues render Plaintiffs' claims atypical, 9 and the few remaining common issues10 do not predominate over thousands of mini-trials that will be necessary to decide the merits of

14

the affirmative defenses. See, e.g., Dongelewicz v. PNC Nat'l Bank Ass'n, 2004 WL
15

1661863, at *816 (3d Cir. 2004) (affirming decision to decertify class because applying
16

"knew or should have known" standard would result in an "`extremely fact specific'
17

individualized inquiry" given the differing circumstances of the individual putative class
18

members) (citing Mathews v. Kidder, 260 F.3d 239, 250 (3d Cir. 2001)).
19 20 21 22 23 24 25 26 27 28
10 9 8

See also Henglein v. Colt Indus. Operating Corp., 260 F.3d 201, 214-15 (3d Cir. 2001) (rejecting continuing accrual rule in § 502(a)(1)(B) claim); Tinley v. Gannett Co., 55 Fed. Appx. 74, 78-79 (3d Cir. 2003) (rejecting continuing accrual rule). Plaintiffs' citations address the question of affirmative defenses in the context of Rule 23(b)(3) predominance, not Rule 23(a) typicality. See Williams v. Sinclair, 529 F.2d 1383, 1388 (9th Cir. 1975); Cameron v. E.M. Adams & Co., 547 F.2d 473, 478 (9th Cir. 1976); Waste Mgmt.t Holdings, Inc. v. Mowbray, 208 F.3d 288, 295-96 (1st Cir. 2000); In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 138 (2d Cir. 2001) (addressing individualized damages, not statute of limitations, issues); Sullivan v. Chase Inv. Servs. of Boston, 79 F.R.D. 246, 264 (N.D. Cal. 1978). Plaintiffs' cases, therefore, simply do not address Defendants' argument that the individualized defenses render the class claims atypical under Federal Rule of Civil Procedure 23(a). (Defs.' Opp. To Class Cert. at 3-4.) In footnote 2 of their Reply, Plaintiffs identify a number of "other claims" they allege are susceptible to class-wide treatment and, thus, support their Motion. However, all of the identified claims are either duplicative of those on which summary judgment has already been granted by this Court, or raise claims for relief that pale in significance to the main claims in this case.

12 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 17 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Despite Plaintiffs' overly restrictive view of the accrual rule, each putative class member's claims accrued when he or she knew or should have known of the injuries giving rise to their claims. There is abundant evidence of numerous communications from which any participant could or should have learned the consequences of the challenged amendments and interpretations. Most or all participants should have learned of their claims through summary plan descriptions and other broadly distributed communications. Indeed, Defendants will argue in a motion for summary judgment that broadly distributed communications (among other available information) placed Plaintiffs (and would have placed other participants) on notice of their claims. For example, in January 1984 participants received two brochures that explained the merger of the Garrett plans into the Signal plans. (See Doc. # 146, Ex. H.) These brochures disclosed the Social Security offset, that the SBA would earn over 12% interest, and that the SBA offset would be calculated using this high interest rate. (Id. at BA0371, 372, 375.) Defendants will contend at the appropriate juncture that this information, and other broadly distributed communications, gave Plaintiffs actual or constructive knowledge of the injuries underlying their claims. Although the merits of that argument are not ripe for disposition yet, it is critical to recognize the necessity of individualized determinations on these issues. Perhaps there are some participants who lacked knowledge of the relevant facts in the 1980s or by the mid-1990s, as unlikely as that seems given the breadth of the communications about the plan amendments and the workings of the retirement plans. The claims of such persons, however, will survive or fail based on facts that are unique to each individual. The claims simply cannot be tried or evaluated on a representative basis, thus, eliminating the prospect of a rational determination on the merits that will bind the class of participants and Defendants. As discussed below, there were innumerable ways

13 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 18 of 37

1 2 3 4

in which putative class members may have been put on notice of their claims.11
1.

Complaints and Inquiries by Plan Participants Regarding the SBA Offset.

In the decades following the challenged plan amendments, the Company received numerous complaints from participants challenging the SBA offset. For example, not
5

long after the challenged plan merger, nearly ninety employees submitted a petition
6

challenging the integration between the Retirement Plan and the SBA account. (See
7

Dauphine Decl. Ex. 14 ("When Signal did this in January 1984, our Severance Account
8

became our Retirement Account.")) The Company also received a series of letters from
9

participants expressing concern over the effect of the SBA offset on their pension and
10

requesting more information. (See Declaration of Marie Gangone at Ex. B ("I have heard
11

many stories about losing my retirement if I take my severance account. I would like to
12

find out about my own personal account."))
13

Although participants complained about the SBA offset as early as 1984 and 1985,
14

the complaints escalated in the 1990s. (See Declaration of Craig Chapman ¶¶ 10-28;
15

Declaration of Maureen Rojas ¶ 3; Declaration of Cindy Burnelko ¶¶ 5, 8.) In 1995, a
16

series of meetings was held to address the SBA offset; hundreds of employees attended
17

and became extremely angry, shouting and challenging that the offsets were a "takeaway"
18

of their benefits. (Id.)
19

These facts exemplify the individualized inquiries that will be necessary to
20

determine what facts were known to employees ­ the protesters and others who remained
21

silent ­ so that each person's claim can be assessed on the merits.
22 23 24 25 26 27 28 14 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 19 of 37
11

Plaintiffs argue that a summary plan description is the only communication that could have provided participants knowledge of their claims. (Pls.' Rpy. Br. at 9 (citing Pisciotta, 91 F.3d at 1329).) Nothing in Pisciotta even remotely suggests that only notice in an SPD can cause a claim to accrue. Indeed, Plaintiffs' argument conflicts with the Ninth Circuit's clear rule that an SPD need only provide notice of the "events" or "actions" that may give rise to a loss or reduction in benefits. See, e.g., Atwood v. Newmont Gold Co., 45 F.3d 1317, 1321-22 (9th Cir. 1995). Plaintiffs' argument also conflicts with their own theory that a claim accrues when a formal administrative claim is made and denied.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

2.

Complaints Led the Company to Prepare Presentations Designed to Address the SBA Offset.

As a result of the chorus of complaints in 1995 that the offsets were improper, the Company conducted a number of presentations to educate participants. (Chapman Decl. ¶¶ 10-17, 42-43; Rojas Decl. ¶¶ 3, 14-19.) One series of presentations was aimed at addressing the participants' concerns over the SBA offset, and provided specific examples of how the SBA offset was calculated and disclosed the precise formula by which the Social Security offset was calculated. (See Chapman Decl. ¶¶ 11-16; Dauphine Decl. Ex. 7 at BA0175-76.)12 Over 1,000 employees attended these presentations. (Chapman Decl. ¶ 11.) After the presentations, several employees complained by email to Craig Chapman, Director of Human Resources. (Chapman Decl. ¶¶ 18-20.) For example, Gary Hertzler complained: When reviewing my paperwork at home that evening, I find that the original literature, which was put out at the time of the creation of the SBA, states that the offset would be calculated on a rate of 3.5% not the 7.5% stated Tuesday [at the meeting]. Since this makes a big difference on the size of the offset an expatiation [sic] would be helpful. (Chapman Decl. ¶ 20; Ex. 5.) Mr. Hertzler's complaint graphically illustrates that participants had all the information necessary to discover their claims. Another presentation series by AYCO, an outside vendor, in 1995 educated participants about their retirement benefits. (See Rojas Decl. ¶¶ 14-16; Chapman Decl. ¶ 42; Dauphine Decl. Ex. 8); (see also Dauphine Decl. Ex. 13 at 147-152 (Allen attended the presentation with her husband, most likely in 1997.)) It disclosed exactly how the Social Security offset was calculated, (Dauphine Decl. Ex. 8 at BA0851), and explained
12

Indeed, Plaintiff Allen's husband took notes on a copy of a handout during one such presentation. (Allen Dep. at 142.) On a page providing an example of the SBA offset, he wrote "SBA offset" "Project out to 65," and "Signal Plan 1-1-84." (Dauphine Decl. Ex. 7 at BA0175.) He also noted "÷ 153.31," the precise annuity conversion factor used to calculate the SBA offset, a factor which the handout materials do not disclose. (Id.) These notations provide strong evidence that the presentations provided a great deal of information regarding the SBA offsets which would have placed participants on notice of their claims. There is no way, however, to discover and present, let alone adjudicate, this evidence on a class-wide basis.

15 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 20 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

the SBA offset in detail. (Id. at BA0853-855); (see also Rojas Decl. ¶ 16; Chapman ¶ 42.) There is no way to identify who attended these presentations and to adjudicate whether or not they obtained actual or constructive knowledge of their claims on a classwide basis. Again, discovery, proof, and adjudication would be required if this case is expanded to cover the myriad putative class members who may have participated in the meetings.
3.

The Company Created a "Focus Group" to Better Understand Employee Complaints Regarding the SBA Offset, and to Create More Effective Communications Regarding the Offsets.

As a result of the vocal reaction of several hundred employees in a presentation regarding the SBA offset, the Company formed a "focus group" designed to identify employee concerns and to determine how to communicate better with employees concerning the SBA offset. (See Chapman Decl. ¶¶ 10-25; Rojas Decl. ¶ 4.) The focus group had four meetings, "led by an outside facilitator," and had "the full resources of the Company . . . available to answer our questions and assist us in [their] mission." (Doc. # 146 Ex. R at BA0209); (see also Chapman Decl. ¶ 27-36.) In October 1995, the participants in the focus group set forth their concerns regarding the SBA offset in a letter, and noted that their concerns "represent[ed] the views of the majority of Engines employees with SBA accounts." (Doc. # 146 Ex. R; Chapman ¶¶ 28-36.) Significantly, the letter challenged the use of both the 7.5% and the 12.3% rates to calculate the SBA offset, and recommended that the Company re-examine "the policy of offsetting retirement with SBA funds." (Id.) Quite obviously, therefore, the focus group members (at a minimum) understood that the SBA offset was not calculated based on a 3.5% credited interest rate. (See Chapman Decl. ¶¶ 18-36.) Plaintiffs denigrate this evidence arguing that it: does not show knowledge by those employees that the interest rates being utilized were different than those required under the "Credited Interest" rate set forth in the Garrett Plan. (Pls.' Rpy. Br. at 9 n.5.) Plaintiffs' argument is both legally and factually flawed. First,
16 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 21 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Plaintiffs forget that this is not a summary judgment argument. The Court need not and should not decide at this stage whether this evidence is sufficient to demonstrate that certain members of the putative class knew or should have known of the alleged harm. Rather, the evidence demonstrates yet another sub set of putative class members who very likely knew or should have known of their claims based on information from multiple sources. Furthermore, the fact that the focus group members "talked extensively with [their] co-workers" suggests that other putative class members may have been placed on notice of their claims. Second, Plaintiffs' arguments are strained from a factual standpoint. There is simply no way to believe that a group of employees who had "the full resources of the company" available to "answer [their] questions" did not receive at least constructive notice of their claims after four meetings designed to explain the SBA offset. Indeed, one focus group member, Bill Shoup, prepared an eight-page summary designed to "enlighten[] co-workers with SBA accounts about the SBA program . . . ." (See Chapman Decl. Ex. 23.) Mr. Shoup's summary explains the exact method by which the SBA offset is calculated, including all of the interest rates used, and the fact that the SBA offset is projected forward to age 65 when computing the offset. (Id.) Mr. Shoup13 clearly understood, therefore, that the offset was not calculated using only the old 3.5% interest rate. Because Mr. Shoup also designed the document to educate other employees, it is quite likely that it placed other employees at least on constructive notice of their claims. The information gleaned from the focus group led the Company to mail to the homes of all SBA participants a detailed pamphlet describing the SBA, as well as a Q & A designed to clarify questions that were identified in the focus groups. (See Chapman Decl. ¶¶ 33, 37-41; Rojas Decl. ¶¶ 6-13.) These communications, in November 1995,
13

Defendants have learned from Plaintiffs' counsel that Mr. Shoup is deceased. This fact, however, does not alter the conclusion that Mr. Shoup's summary suggests that other participants may have gained actual or constructive knowledge of their claims from their dealings with Mr. Shoup. What's more, Mr. Shoup's death demonstrates that the concerns underlying laches and limitations defenses are strongly implicated in this case.

17 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 22 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

described the history of the SBA offset, reaffirmed that the formula used to calculate the SBA offset was changed on January 1, 1984, and again advised employees that the offset was calculated based on a 12.3% rate of growth. (Id.) Again, the thousands of employees may have had varying degrees of knowledge or understanding after receiving these mailings, but such questions cannot be answered based on the experiences of the six Named Plaintiffs.
4.

Administrative Claims.

Participants' use of the Plans' administrative claims process is further evidence that individuals were on notice of the alleged harm sufficient to begin accrual of the limitations period. For example, in January 1984, employee Lyle Six challenged the calculation of the SBA offset, contending that the post-merger plan terms created an SBA offset that was larger than allowed by the old plan.14 (See Declaration of Connie Zeller Ex. A at HWBF00477235-36.) Mr. Six calculated the "Apparent Excess Reduction" under the new plan compared to the old plan, and argued that the SBA offset was more than double what he believed it should be. (Id.) The Company rejected Mr. Six's claim, and explained in detail how the offset was calculated. (Id. at HWBF00477227-229.) Based on the correspondence between Mr. Six and the Company, the conclusion is inescapable that Mr. Six knew or should have known of his claims in 1984, nearly 20 years before Plaintiffs filed the instant action. (Id. at Ex. A.) Without individualized discovery, proof, and adjudication, it is impossible to determine how many other putative class members had similar concerns based on the vast information that was provided to them, but it is clear that others have expressed those concerns. (See, e.g., Chapman Decl. at Ex. 5 (participant complaining of use of 7.5% rather than old 3.5% rate in offset calculation).) Charles Kinney submitted a claim
14

Plaintiffs' counsel represented Mr. Six in the administrative process in this case in 2002 and 2003. Defendants recently learned from Plaintiffs' counsel that Mr. Six is also deceased. Given the passage of time, there are undoubtedly many other witnesses and putative class members who have passed away and from whom Defendants are no longer able to obtain oral evidence critical to their defenses, which is one of the very reasons justifying laches and limitations defenses.

18 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 23 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

challenging the SBA offset in 1993. (See Zeller Decl. Ex. C at HW0019336-38.) In August 1993, the Company denied the claim and provided Mr. Kinney with a specific outline of the manner in which his offset was calculated, including 149 pages of plan documents and a notice of his appeal rights. (Id. at HW0019372-82; see also id. at HW0019344-45.) Similarly, Eugene Kerkman filed a claim challenging the deduction of administrative expenses from the SBA in 1996, which was denied. (See Zeller Decl. Ex. B.) Plaintiffs will undoubtedly argue that prior administrative claims are isolated occurrences, because if others existed, Defendants would have identified them. Plaintiffs' protestation is misplaced and misses the point. Defendants maintain benefit files on behalf of all of the 10,000+ putative class members in this litigation. Claim documents are contained in those files, much like a needle in a hay stack. It is simply unrealistic to suggest that Defendants should be capable of identifying all such claims from the huge volume of benefit files. Moreover, the fact that participants made such claims is important not to prove that their individual claims are barred, but rather because it is demonstrative of the relevant individualized knowledge inquiry. On a more fundamental level, it is important to emphasize that the issue is not who asserted claims, but what information was provided to participants. Plaintiffs do not contend, nor could they do so in good faith, that Messrs. Six, Kinney and Kerkman received documents and information that were not provided to other participants. For whatever reason, these three employees challenged the Company. Perhaps others believed that there was nothing unlawful in an increase in the interest rate embodied in the SBA, or maybe they understood that their net benefit was increased or at the least preserved. The critical point is that information was provided that enabled participants to gain actual knowledge of the changes in the benefit formula. (See, e.g., Chapman Decl. ¶ 20; Zeller Decl. at Ex. A.) Unless Plaintiffs are prepared to concede that all participants had such information, they cannot bypass the need for individualized examinations of the claims and defenses.
19 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 24 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
16

5.

Consultation with Attorneys.

Other evidence demonstrating actual or constructive knowledge includes documents revealing that employees consulted with counsel regarding the SBA offset. Perhaps the most glaring instance is the case of Jack Gilmore (and those unidentified individuals on whose behalf he purported to act), and his exchange with attorney Blair Brininger, Esq. regarding the offsets at issue in this case. (See Docs. # 146, 172 Ex. S at BA2131-BA2135.)15 In 1999, Mr. Gilmore sought advice from Mr. Brininger regarding the offsets. (Id. at BA2131.) Mr. Brininger replied to Mr. Gilmore: Thank you for sending me copies of your documents. I have reviewed them and think you may have a case. However, I am concerned that back in 1984 everyone knew that Allied was doing this. The statute of limitations, at most, would be 6 years for breach of fiduciary duty. . . . I believe time is of the essence. (Id. (emphasis added).) Mr. Gilmore, undeterred by Mr. Brininger's advice, responded as follows: Thank you for reviewing our material we sent you and also thank you for the phone call. I know we have a case, but we have to find someone who believes in us and find ways around the ERISA laws. I know there has to be some loop holes in the law that will benefit us. . . . (Id. at BA2132 (emphasis added).) Mr. Gilmore likely had conversations with Ms. Allen and an unknown number of other putative class members about his discussions with an attorney.16 (See Dauphine Decl. Ex. 13 at 193-199 (Plaintiff Allen testifying that she had talked with Mr. Beilert about his attempts to contact an attorney).) It is these types of facts that will need to be explored to adjudicate the defenses if this case is expanded beyond the six Named Plaintiffs.
15

Mr. Gilmore produced this document to the Department of Labor and to other individuals, thereby waiving any privilege that may have attached to it. Plaintiff Allen produced this document to Defendants in this litigation. For example, Mr. Gilmore, together with Paul Beilert, had gathered a group of "over 100" individuals to challenge the offset. (See Docs. # 146, 172 Ex. S at BA1905-06.)

20 Case 2:04-cv-00424-ROS Document 186 Filed 06/30/2006 Page 25 of 37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

It is not simply a theoretical possibility, moreover, that other putative class members consulted with attorneys. A flyer was posted in 1995 at one of the Company's facilities that solicited employees to speak to the "Law Firm of William M. Spence, P.C." to challenge the SBA offset. (See Declaration of Diane Sucharski Ex. A.) While this flyer does not specifically raise the same claims that the current Plaintiffs do, there can be no doubt that the "concerned employee" who posted the flyer, and anyone who considered seeking or sought representation, believed that the Company had acted illegally and that employees were entitled to "damages." (Id.) Still other participants were working to create a class to challenge the SBA offset in this time frame. (See Chapman Decl. ¶ 45.) Such participants were at least on