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SUSAN MARTIN (AZ#014226) DANIEL L. BONNETT (AZ#014127) JENNIFER KROLL (AZ#019859) MARTIN & BONNETT, P.L.L.C. 3300 N. Central Avenue, Suite 1720 Phoenix, Arizona 85012-2517 Telephone: (602) 240-6900 [email protected] [email protected] [email protected] Attorneys for Plaintiffs IN THE UNITED STATES DISTRICT COURT
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FOR THE DISTRICT OF ARIZONA
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Barbara Allen, Richard Dippold, Melvin Jones, Donald McCarty, Richard Scates and Walter G. West, individually and on behalf of all others similarly situated, Plaintiffs,
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vs.
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Honeywell Retirement Earnings Plan, Honeywell Secured Benefit Plan, Plan Administrator of Honeywell Retirement Earnings Plan and Plan Administrator of Honeywell Secured Benefit Plan, Defendants.
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) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
No. CV04-0424 PHX ROS
Reply in Further Support of Motion for Class Action Certification (Oral Argument Requested)
Plaintiffs submit this reply in further support of their motion for class certification.
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Despite dispositive rulings on the main claims in this case, (Order dated November
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18, 2005, Doc.138 at p.31), Defendants oppose class certification based on the
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unsubstantiated assertion that affirmative defenses might bar some of the class members
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claims and make individual issues predominate or defeat typicality or adequacy of
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representation. This action was filed promptly following discovery of the facts giving rise
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to the claims and Defendants repudiation of these claims in the administrative claims
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process. Defendants affirmative defenses fail and cannot defeat class certification because:
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1. Plaintiffs causes of action did not accrue until denial of Plaintiffs administrative appeal and the expiration of a tolling agreement on March 1, 2004, the date this case was filed, (Declaration of Susan Martin dated June 12, 2006, Martin Decl. Exhibit A); 2. Even if Plaintiffs claims could be deemed to have accrued earlier, they were tolled by agreement from January 24, 2003 through March 1, 2004 and by operation of law for failure to give notice of the right to appeal, for failure to comply with Plaintiffs requests for plan documents and while the administrative claims process was pending; 3. Defendants waived all affirmative defenses against the named Plaintiffs by failing to prove them in opposition to Plaintiffs motion for summary judgment; 4. Defendants waived all affirmative defenses other than the statute of limitations against all class members by failing to assert them during the administrative claims process, and 5. Even if Defendants could satisfy their burden to establish a meritorious defense, this case meets all of the requirements for class certification under Federal Rule of Civil Procedure 23(b)(2) and 23(b)(3) and under controlling Ninth Circuit precedent, class certification is appropriate.1 PROCEDURAL HISTORY In its July 19, 2005 opinion, (Doc. 73), this Court granted summary judgment to Plaintiffs on their anti-cutback claims, finding that retroactive changes, including changes to the credited interest rate the Plan required to be utilized to calculate the SBA offset, the elimination of the fractional reduction in the offset for participants who worked more than 35 years and the application of a Social Security offset to benefits attributable to years of service worked prior to the adoption of the offset, retroactively reduced Plaintiffs accrued benefits in violation of ERISA § 204(g). This Court also granted Plaintiffs claims that the
Williams v. Sinclair, 529 F.2d 1383 (9th Cir. 1976); Cameron v. E. M. Adams & Co., 547 F.2d 473 (9th Cir. 1976).
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terms of the Plan and ERISA were violated by applying the SBA offset to the minimum benefits formula and by amending the minimum benefits formula retroactively and without notice. In ruling that Defendants unlawfully reduced Plaintiffs accrued benefits, the Court ruled that Defendants violated the Plan by: retroactively increasing 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; adopting a Social Security offset attributable to years of service worked prior to introduction of that offset; and eliminating a Garrett Retirement provision requiring a fractional reduction to the Secured Benefit Account offset for participants with more than 35 years of service. (Doc. 73 p. 12.) The Court noted that: The Plan provides the Secured Benefit Accounts of participants who retire early or separate from service before age 65 "shall be" increased by "Credited Interest," and it defines "Credited Interest" in turn as "interest computed annually at 3-1/2%." (Id. p. 20.) As the Court has noted on two occasions, its anti-cutback rulings determined the main issues in this case. (See Order dated November 18, 2005 p. 31, Doc. 138 (citing Doc. 73, at p. 48).) With respect to each of the claims determined on summary judgment, the only issues remaining to be decided are remedies and whether any of the approximately 12,500 putative class members might be precluded from participating in the recovery based on an affirmative defense. In addition to the matters resolved by the Court s July 19, 2005 opinion, there are additional claims to be determined. Plaintiffs breach of contract claims are based on the same operative facts as the anti-cutback claims. Plaintiffs additional claims are also based on Defendants actions or refusal to act on grounds applicable to the entire proposed class or subclasses, making class certification appropriate.2
Plaintiffs additional claims include: Defendants failure to provide Plan documents; Defendants imposition of administrative fees on Plaintiffs Secured Benefits Accounts in violation of the Plan and ERISA § 204(g) and (h); Defendants failure to remedy the claim granted in the administrative process; Defendants Plan amendments in 2000 that resulted in a loss of pre-1984 service credit; Defendants violation of ERISA s written plan
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Plaintiffs filed the motion for class certification on August 26, 2005. (Doc. 84.) Following several extensions of time and after serving discovery and taking depositions of named Plaintiffs, Defendants filed their opposition to Plaintiffs motion on April 3, 2006. (Doc. 146.) At the scheduling conference held on April 13, 2006, the Court directed that Plaintiffs submit a reply brief on the motion for class certification within fourteen days following Defendants compliance with Plaintiffs interrogatories and requests for production as applied to all putative class members. Following the April 13, 2006 scheduling conference, (at which the Court indicated its preliminary views on class certification), and in apparent recognition that their brief in opposition to class certification failed to establish grounds for denying the motion, Defendants filed yet another brief and exhibits addressed, in part, to their claimed statute of limitations defense. (See Doc. 161.) Although Defendants have yet to produce answers to interrogatories and documents with respect to all class members, based on the documents Defendants produced regarding the named plaintiffs, and based on imaged benefits files that Defendants produced for some, but not all, of the putative class members, Plaintiffs submit that there are no valid affirmative defenses, and even if there were, they could not defeat class certification. Accordingly, this reply is being filed in advance of Defendants compliance with the Court s order to produce documents and to respond to interrogatories with respect to all class members. In their response to Plaintiffs motion for class certification, Defendants do not challenge numerosity. With respect to Rule 23(a) s requirements of commonality, typicality and adequacy of class representatives, Defendants make no opposition to Plaintiffs motion except to argue that unique issues with respect to Defendants affirmative defenses bar class certification. However, despite the extensive discovery conducted by Defendants with respect to each of the six named Plaintiffs, it is clear that Defendants cannot meet their
requirements, and Defendants violation of ERISA s merger requirements.
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burden to establish any of their affirmative defenses.3 None of the documents addressed by Defendants in their opposition to class certification triggered the running of the statute of limitations. None put Plaintiffs on notice that their accrued benefits were reduced in violation of the terms of the written Plan documents. Nor, prior to termination of the administrative claims process, was there any clear repudiation by Defendants of the claims asserted in this lawsuit. Even if Defendants could satisfy their burden to show that prior to the conclusion of the administrative process, Defendants had repudiated Plaintiffs claims following notice to Plaintiffs, the statute of limitations would have been tolled through the conclusion of the administrative claims process. I. AFFIRMATIVE DEFENSES ARE NO BAR TO PLAINTIFFS CLAIMS A. The Statute of Limitations Could Not Run Until 2010
Because the Plan is a contract and Plaintiffs seek to recover benefits as a result of Defendants ERISA and plan violations, the appropriate statute of limitations is Arizona s six year contract statute of limitations. Ariz. Rev. Stat. § 12-548; Wetzel v. Lou Ehlers Cadillac Group., 222 F.3d 643, 648 (9th Cir. 2000) (en banc) (the controlling statute of limitations for an action to recover benefits is the state statute for claims on written contracts). Defendants do not assert the applicability of any other statute of limitations.4 They also admitted that the statute of limitations depends on when Plaintiffs had knowledge of the... breach or violation that is the basis for his or her claim (Defs. Class Cert. Opp., Doc. 146, p. 6.) Defendants rely on cases such as Martin v. Constr. Laborer s Pension Trust For S. Cal., 947 F.2d 1381, 1384 (9th Cir. 1991) for the proposition that claims for benefits
See, e.g., Fruit and Vegetable Packers and Warehousemen Local 760 v. Morley,378 F.2d 738, 746 (9th Cir. 1967) ( The bar of a statute of limitations is an affirmative defense, as appellants noted in their answer. They were thus required to prove every element of the defense. ). Defendants specifically disclaim the applicability of ERISA § 413, which deals with claims for breach of fiduciary duty. (See Doc. 161, p. 7 n. 2.)
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under ERISA accrue when a clear and continuing repudiation of rights under the pension plan is made known to the beneficiary . (Doc. 146 p. 14 (citing Martin).) In opposing Plaintiffs motion for class certification, Defendants attempted to show that the clear repudiation standard articulated in Martin, 947 F.2d at 1384, was met in this case arguing that Plaintiffs received a clear repudiation of their alleged right to lower offsets when they received a final benefit calculation, and that other putative class members may have received clear repudiations at other times. (Doc. 146, p. 14, ll. 5-16.) Apparently recognizing their inability to meet their burden to show clear repudiation in this case, Defendants second brief on this issue attempts to back away from their class certification brief by claiming that the clear repudiation requirement does not apply. (Doc. 161, p. 6.) Defendants belated attempt to argue that the Ninth Circuit s clear repudiation standard does not apply in that it is somehow less stringent than the notice required under the federal discovery rule and their arguments that Martin is somehow limited to suits to enforce rights under a pension plan are without merit and are not supported by the case law. In the first place, as in Martin, this case is brought to enforce rights under a pension plan. The rights to benefits at issue here unequivocally arise under the Plans promises.
As the Court made clear in its summary judgment ruling: Like all retirement plans, the Garrett Retirement Plan contains similar mandatory language and unconditional promises. The Plan provides the Secured Benefit Accounts of participants who retire early or separate from service before age 65 shall be increased by Credited Interest, and it defines Credited Interest in turn as interest computed annually at 3-1/2%. (Garrett Retirement Plan §§ 1.4, 4.1©).) Further, the Plan provides that all retirees who have completed more than 35 years of service shall receive a fractional reduction in the amount of their Secured Benefit Offset. (Id.) The Plan also provides that the Objective Retirement Income for a participant, whether an early retiree or not, shall be calculated pursuant to a series of formulas, none of which contain a social security offset. (Id. § 4.1(b).) (Opinion, Doc. 73 p. 20 (footnotes omitted).) As the Court s decision recognizes, Plaintiffs anti-cutback claims flow from Plan provisions that were violated by application of Plan amendments to benefits earned before the amendments were adopted. To argue that this is not a suit to enforce rights under a pension plan is to ignore the facts. See also May Dep t
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Stores Co. v. FDIC., 305 F.3d 597, 601(7th Cir. 2002) ( The benefits sought were plan benefits; the question was how to compute them. The answer was given by ERISA, but that is just to say that, like many other contracts, pension plans governed by ERISA contain provisions implied by law... ). Further, the Ninth Circuit has never held that a clear repudiation is not required under the discovery rule nor that the showing Defendants must make for statutory violations is somehow less stringent than under Martin. Defendants assertions are disingenuous, especially given their earlier arguments that the federal discovery rule and the clear repudiation standard are the same. (See Doc. 146, pp. 14, 15.) There was no clear repudiation of the claims asserted in this case until Defendants repudiated the claims in their January 24, 2004 denial of Plaintiffs administrative appeals. See Martin, 947 F.2d at 1384; Wetzel, 222 F. 3d at 648. See also ABA Section of Labor & Employment Law Employee Benefits Law 889 (2d ed. 2000) ( Generally, the Circuit courts hold that a claim for relief under § 502(a)(1)(B) does not accrue until there is a formal and final denial of benefits as contemplated in the plan s claim procedure. ); Stevens v. Employer-Teamsters Joint Council No. 84 Pension Fund, 979 F.2d 444, 451 (6th Cir. 1992) ( An ERISA cause of action for benefits under ERISA does not arise until a claim for benefits has been made and formally denied. Other circuits have uniformly accepted this position. ); Miles v. New York State Teamsters Conference Pension & Retirement Fund Employee Pension Benefit Plan, 698 F.2d 593, 598 (2d Cir. 1983). (A plaintiff s ERISA cause of action accrues, and the six-year limitations period begins to run, when there has been a repudiation by the fiduciary which is clear and made known to the beneficiaries. ) (citations omitted); Morgan v. Laborers Pension Trust Fund for N. Cal., 433 F. Supp. 518, 523 (N.D. Cal. 1977). Even if the Court were to determine that Plaintiffs claims somehow fail to seek to enforce rights to benefits under a pension plan or that the clear repudiation standard does not apply and even if knowledge alone in the absence of a clear repudiation can commence the running of the statute of limitations, Defendants cannot meet their burden to prove
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knowledge of these claims outside of the limitations period. There is no showing that Defendants ever disclosed the benefit provisions and changes to the benefit provisions, which form the basis of Plaintiffs claims. It is not enough to claim, as Defendants do, that Plaintiff Allen may have felt that her benefits were lower than expected or that Plaintiffs Allen and Jones knew that the offsets existed. Defendants made no showing whatsoever that any Plaintiff was aware of the Garrett Plan s required Credited Interest rate or that the written plan prohibited an offset to the minimum benefits formula. In reversing a case that Defendants relied on in support of their motion to dismiss, (Doc. 38), the Second Circuit held that mere knowledge by a participant of the amount of their pension benefits or concern that the benefits were lower than anticipated does not constitute knowledge of breach of ERISA or the terms of a Plan and does not trigger the statute of limitations: Although the 1995 Benefits Update may have provided notice that the plaintiffs' benefits would be lower than they expected, it certainly did not inform the plaintiffs that the phantom account was being applied in contravention of the Plan's terms. Thus, while the Benefits Update may have heightened the plaintiffs' concerns regarding their expected benefits, it is not enough that [plaintiffs] had notice that something was awry; [plaintiffs] must have had specific knowledge of the actual breach of duty upon which [they sued]. Such knowledge of an actual breach could only come with disclosure of the fact that the defendants misrepresented the terms of the Plan in justifying the usage of the phantom account. Frommert v. Conkright, 433 F.3d 254, 272 -73 (2d Cir. 2006) (quoting Caputo v. Pfizer,
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Inc., 267 F.3d 181, 193 (2d Cir. 2001)). In this case, in order to prove knowledge of the anti19
cutback claims sufficient to trigger the statute of limitations, Defendants would have to prove
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that Plaintiffs were told or knew that the Garrett plan document required Credited Interest
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at 3 ½%, that Defendants changed the interest rates and applied them to benefits attributable
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to service before the change and that Defendants rejected Plaintiffs claims.
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This Court has already noted that the summary plan description issued in year 2000, (well within the statute of limitations), was the first to disclose the interest rates used to calculate the offset. (Doc. 73, p. 45 n. 7.) However, the year 2000 SPD does not disclose that the Garrett Retirement Plan required a 3 ½% Credited Interest rate, which was changed.
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(Declaration of Dawn Dauphin dated November 8, 2004, Doc. 60, Exhibit C.)5 Defendants fail to point to a single document that would have put Plaintiffs on notice of the retroactive changes to their benefits.6 The SPD is the statutorily established means of informing
participants of the plan and its benefits. Pisciotta v. Teledyne Industries, Inc. 91 F.3d 1326, 1329 (9th Cir. 1996). Given that no SPD discloses the facts upon which these claims are based, Defendants arguments that Plaintiffs had knowledge upon which these claims arise should be rejected.7 There is no indication that prior to receipt by Plaintiffs counsel, (in a
Like the 2000 SPD s failure to show that Plaintiffs had knowledge of the claims asserted in this case, the fact that ten employees were appointed to a focus group in 1995 and may have known of the actual interest rates used to calculate the SBA offset, (see Decl. of Dawn Dauphine, doc. 147, Exhibit R), 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. Likewise, Defendants reliance on the activities of Barbara Allen and a small group of retirees who submitted information to the Department of Labor, is of no avail. As is clear from the exhibits submitted by Defendants, (Doc. 147, ex.S), this small group was voicing their belief that the mere existence of Honeywell s offsets somehow constituted tax fraud, a claim not asserted nor even remotely relevant to the facts or legal issues raised here. Defendants point to nothing about the activities of Barbara Allen or the other retirees or their submission that demonstrates knowledge by Plaintiffs that plan amendments were adopted and applied retroactively to reduce their accrued benefits. In October 1995, the company listed all communications regarding the SBA offset. (See Dauphine Decl. Doc. 147, Exhibit Q,R.) As set forth in the October 1995 exhibit, only four communications were made regarding the SBA offset on or after January 1, 1984. None of these put Plaintiffs on notice of the claims asserted in this case or constituted clear and unequivocal repudiations of Plaintiffs claims. Moreover these documents lay to rest any claim that Defendants need to take discovery in order to ascertain their own communications, which they claim they are unable to find due to lapse of time. Each of the documents listed are in evidence and belie Defendants claim that they need discovery from putative class members regarding communications they received from Defendants. While the Signal and later SPDs do disclose a Social Security offset, Defendants make no showing that they disclosed that the offset would be applied retroactively to reduce benefits attributable to years of service prior to its adoption. Neither have Defendants purported to show prior to 2003, that following knowledge by Plaintiffs that their benefits were retroactively reduced, Defendants repudiated Plaintiffs Social Security offset claims.
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period well within the statute of limitations), of the still incomplete copies of the Plan documents and amendments thereto, that anyone had notice of these claims. Defendants claim that a January 1984 brochure showed that the SBA offset would be calculated at 12.3% is both beside the point and incorrect. The document merely shows the growth of the SBA account (at the incorrect rate of 12%) and makes no disclosure concerning the calculation of the SBA offset. Defendants do not even assert that the brochure discloses the interest rates used to project the phantom growth of the SBA if a participant leaves employment. There are likewise no plan descriptions, benefits booklets or company communications that put Plaintiffs on notice that the official Plan document did not permit an SBA offset to the minimum benefits formula and that the Plan was retroactively amended in or around 1993 to impose such an offset. Defendants were adamant in the administrative process and in the summary judgment briefing that the terms of the Plan permitted them to apply an SBA offset to the minimum benefits formula. (See Opinion, Doc. 73 pp. 32-35.) Given Defendants position in this case, they cannot plausibly claim that they somehow disclosed that the Plan did not permit them to apply the offset. Likewise, given the Court s ruling that Defendants failed to give notice of the amendments to the Plan in 1993 in violation of ERISA § 204(h), it is nonsensical to assert that Plaintiffs were somehow on notice of the failure to provide notice. Defendants grossly misstate the case law as applied to the facts of this case in arguing that a participant somehow obtained actual knowledge of the application of the
challenged amendment to his benefits upon his receipt of a benefit check calculated based on the challenged amendment, (Doc. 146 p. 7), or that estimates or benefit calculations worksheets were sufficient to trigger the running of the statute of limitations. Absent knowledge that the plans were adopted and applied in conflict with the requirements of the retirement plans, receipt by some of the Plaintiffs of benefits calculated in violation of the
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plans could not trigger the statute of limitations. See Loewy v. Retirement Committee, No. CV 03-2284 PHX FJM , Order dated March 28, 2005,doc. 103, at pp. 19-20 attached hereto as Exhibit A. The cases relied on by Defendants are not to the contrary. For example, in Meagher v. Int l Ass n of Machinists & Aerospace Workers, 856 F.2d 1418, 1420 (9th Cir. 1988), before the Meagher plaintiff s benefits commenced, letters were sent to the retirees advising them that the living pension feature of their existing plan was being eliminated. See also Shaw v. International Assoc. of Machinists & Aerospace Workers Pension Plan, 750 F.2d 1458 (9th Cir. 1985). In Meagher, even though the plaintiffs were clearly on notice of the prior lawsuit challenging the amendments, the court held that the case was timely with respect to all benefit payments received within the three years prior to the commencement of the Meagher suit.8 Hulteen v. AT & T Corp,. 441 F.3d 653, 663 (9th Cir. 2006), also cited by Defendants, is inapposite. The Ninth Circuit s principal holding was that the Pregnancy Discrimination Act is not retroactive. There is no indication in that case that the employees
Defendants claim that Meagher has been effectively superseded with respect to the Ninth Circuit s continuing breach ruling is incorrect. No Ninth Circuit en banc decision has ever overruled Meager. Hart v. Massanari, 266 F.3d 1155, 1171 (9th Cir. 2001). Like the continuing breach recognized in Meagher, under Arizona s contract statute of limitations, the statute of limitations on a series of successive payments due under a contract runs when each payment is due and not paid. Navy Federal Credit Union v. Jones,187 Ariz. 493, 494, 930 P.2d 1007, 1008 (Ariz. App. 1996) ( Most courts that have addressed the issue rule that the action accrues and the statute of limitations runs against each installment from the time it becomes due. ). See also Dameron v. Sinai Hosp. of Baltimore, Inc., 815 F.2d 975, 981 (4th Cir. 1987) (incorrect monthly benefits payments each constituted a series of contract breaches under Maryland law). Therefore, (after factoring in applicable tolling periods),even if the statute of limitations had accrued more than six years before commencement of this case the suit would be timely with respect to all benefit payments received by Plaintiffs within the applicable period as well as all future benefit payments.
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ever asserted they did not know they were not going to receive credit for their pre-1979 pregnancy leaves. Defendants never describe how the calculation worksheets some of the Plaintiffs received put them on notice that their benefits had been reduced or that the Plan s terms were violated. Defendants cannot meet their burden based on receipt of an estimated benefit or calculation worksheet. The calculation worksheets, (see, e.g., Dauphine Decl. Doc. 147, Exhibits T and U), are fundamentally unintelligible, confusing and incomplete. They range in length from 17-20 pages, require the reader to Look up Factors from Tables that still have never been provided to Plaintiffs or to Plaintiffs counsel and do not disclose the interest rates used to calculate the offsets. (Martin Decl. ¶ 5.) While a skilled actuary might be capable of deciphering what the amounts might mean, (but without access to the tables perhaps not be sure), it is unreasonable to suggest that plan participants could have been able to do the same and have knowledge sufficient to trigger a limitations period.9 Even if Plaintiffs somehow divined the interest rates that were used to calculate their SBA offsets, mere knowledge that their benefits were offset at high interest rates does nothing to bar their claims. This is not a case challenging high interest rates in and of themselves. The rates used are relevant only in relation to rates the Garrett Plan required. As set forth above, it is not knowledge that their benefits were computed at a high interest rates that puts Plaintiffs on notice of Defendants illegal actions, it is knowing that plan
With respect to Plaintiff Allen, Defendants claim that she received estimates outside the limitations period disclosing the SBA offset amount. (See Dauphine Decl., Doc. 147, Exhibits L & M.) In fact, the estimate dated January 17, 1997, which is the only estimate Defendants point to that arguably might be outside the six year statute of limitations period, does not even contain the amount of the SBA offset. (Id., Exhibit L.) Later estimates, including one dated November 19, 1997, are indisputably within the six year statute of limitations period, and, as is true with respect to the calculation worksheets, do not disclose that the Plan provisions at issue in this case were violated. (Id., Exhibit M.)
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provisions as written required interest rates to be fixed at 3 ½% and that they were changed and applied retroactively.. Schultz v. Stoner,308 F.Supp.2d 289, 298-99 (S.D.N.Y. 2004) ( The record before the Court indicates that Plaintiffs did not become aware of the terms of the plans-an essential factual element of their claim-until 2000 or later, well within the threeyear limitations period. ). To trigger the running of the statute of limitations, Defendants must show clear and unequivocal notice and repudiation, not incomprehensible and incomplete mathematical calculations. In Loewy v. Retirement Committee, No. CV 03-2284 PHX FJM , Order dated March 28, 2005, Doc. 103, at pp. 19-20 attached hereto as Exhibit A, the court found that Arizona s six year contract statute of limitations applied to claims for violations of ERISA §§ 203 and 204. The court held that Plaintiff s claims that his benefits should have been actuarially adjusted for failure to give an ERISA required suspension of benefits notice was timely. Although the plaintiff in that case began receiving benefit checks in 1996, seven and a half years before the lawsuit was commenced, that court found that the defendants failed to show how plaintiff knew or should have known that his pension checks did not contain the actuarial increase he claims. B. Even If the Cause of Action Could Be Deemed to Have Accrued Earlier, it Was Tolled Through the Filing of the Complaint on March 1, 2004
Even if the Plaintiffs claims could be deemed to have accrued more than six years prior to the filing of this lawsuit, the statute of limitations was tolled by: 1. Defendants failure to notify Plaintiffs of their rights to appeal or to file a civil action; 2. Defendants failure to provide plan documents requested by Plaintiffs that were necessary to evaluate the claims asserted in this lawsuit; 3. The pendency of the administrative claim and appeal process, and
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4. A written agreement tolling the statute of limitations from January 24, 2003 through March 1, 2004. Assuming arguendo that Defendants somehow put Plaintiffs on notice that their accrued benefits were reduced or that the Plan prohibited offsets to minimum benefits and assuming such notice constituted an unequivocal repudiation of Plaintiffs claims, the statute of limitations would have been tolled as a result of Defendants failure to notify Plaintiffs of their rights to appeal or file a civil action. ERISA regulations provide that a participant must be given notice of his right to appeal the denial of a claim or to bring a civil suit under ERISA in a manner calculated to be understood by the claimant, 29 C.F.R. § 2560.5031(g)(1), (j). See Veltri v. Building Service 32B-J Pension Fund, 393 F.3d 318, 325-26 (2d Cir. 2004) (where fund failed to advise participant of right to appeal or bring suit, equitable tolling was appropriate). The Fund's nondisclosure must be viewed in light of the
regulatory notice requirement and of Congress's policy of protecting the interests of pension plan participants by ensuring disclosure and reporting to participants and ready access to the Federal courts. Id. at 224 (citing 29 U.S.C. § 1001(b)).
There is no evidence that prior to notice of the decision on Plaintiffs administrative claims, Defendants ever notified Plaintiffs of their rights to file an appeal or bring suit. For example, Plaintiff Jones testified that he asked the company representative conducting his exit interview about the offset of his benefits, and Mr. Jones stated that with respect to the offsets, the company representative pointed them out...But she did not explain exactly what they were, and I m not really sure if she even knew, to tell you the truth. (Doc. 159, Exhibit B, Deposition of Melvin Jones, p. 25, ll. 3-6.) Mr. Jones stated that when he asked about the offsets, the company representative about the offsets, she replied that s the way it was. (Dauphine Decl. Doc. 147, Exhibit C, at p. 21, ll.24-25 & p. 22, l. 8.) Defendants failed to notify Mr. Jones that he had a right to appeal or that he could bring a civil lawsuit.
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Tolling is also appropriate because Defendants failed to provide documents critical to Plaintiffs claims. Plaintiffs have sued for Defendants failure to timely produce documents. Plaintiffs allege that the plan administrator failed to timely produce (1) the
February 4, 1984 iteration of the Signal Retirement Plan, (2) Exhibit B to the Garrett Retirement Plan, (3) documents verifying the modifications, amendment or adoption and verifying the authority to modify, amend or adopt changes to the Signal Retirement Plan... (Doc. 73, p. 41.) As the Court s decision makes clear, these documents are necessary to establish Plaintiffs claims: Plaintiffs cannot determine their benefits without reference to prior plans like the Signal and Garrett Plans. (Id. p. 41.) Defendants failure to provide these Plan documents estops them from asserting this action is untimely and equitably tolled the statute of limitations. See, e.g., Veltri, 393 F.3d at 224. Plaintiffs counsel first requested all plan documents on June 15, 2001. (Affidavit of Marie Gangone, Doc. 33, Exhibit 1.) Defendants did not even produce the February 1984 document that they relied on at summary judgment until October 1, 2003, over two years after Plaintiffs first requested it and only after Plaintiffs had filed their appeal from denial of their claims. Defendants did not produce Exhibit B, the tables required to calculate benefits under the Garrett Retirement Plan, until almost two years after it was requested and only after Plaintiffs administrative claim and appeal letters had been filed. (Amended Complaint ¶ 71.) In fact, more than a year after Plaintiffs first requested Exhibit B, Defendants wrote a letter dated November 19, 2002, claiming it was not clear that it was required to provide plan documents to an attorney representing a plan participant and further stating that they had not found Exhibit B, but they had found a signed copy of the Plan that did not contain Exhibit B. Defendants stated [a]lthough we cannot be certain, this suggests that Exhibit B does not exist and may never have existed. (Martin Decl. ¶ 4 and Exhibit B.) Defendants
in fact produced Exhibit B in June 2003. (Doc. 55 ¶ 9.) To this day, Defendants still have not provided all the information utilized by Defendants in the calculation of Plaintiffs
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benefits. For example, in order to do a Social Security offset calculation according to the Plan, a table containing the Plan s Social Security assumptions is utilized. Plaintiffs
counsel has still not received that table. (Martin Decl. ¶ 6.) It is hard to fathom how Defendants can claim that this action should have been brought years ago, when more than two years after litigation has actually commenced, Defendants have not produced complete Plan documents and tables relevant to their own calculation of Plaintiffs benefits, including future retirees benefits. The action was also tolled during the administrative claims process by operation of law and by agreement. Plaintiffs administrative claims were denied on January 24, 2003 (See Promislo Decl. Exhibit K.) From January 24, 2003 through March 1, 2004, the action was tolled pursuant to a tolling agreement between the parties. (Martin Decl. ¶ 7.) Even in the absence of a tolling agreement, the statute of limitations would have been tolled during the pendency of the administrative process, which commenced on or about July 26, 2002. See, e.g., Chappel v. Laboratory Corp. of America, 232 F.3d 719 (9th Cir. 2000); Northern Cal. Retail Clerks Unions v. Jumbo Markets, Inc., 906 F.2d 1371, 1372 (9th Cir. 1990); Counts v. American General Life and Acc. Ins. Co., 111 F.3d 105, 108 (11th Cir. 1997). Because this action was commenced on March 1, 2004, this action is timely. C. Defendants Waived All Affirmative Defenses Against the Plaintiffs
Defendants challenges to the adequacy and typicality of the class representatives are also without merit because Defendants waived affirmative defenses against all of the named Plaintiffs by failing to prove them in opposition to the motion for summary judgment.10 See
In its order on Defendants motion for clarification, the Court ruled that Defendants had not waived their rights to take discovery on and assert affirmative defenses relating to individual putative class members claims. (Doc. 138, p. 14.) This order was not a ruling that Defendants could raise affirmative defenses against the named Plaintiffs despite their failure to raise them prior to entry of summary judgment. The Court has not yet ruled on whether affirmative defenses are barred against the named Plaintiffs by the failure to raise
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Kontrick v. Ryan, 540 U.S. 443, 458-60 (2004) (failure to argue that a claim was time barred in opposition to a motion for summary judgment precluded the assertion of that defense even though there was no dispute that the claim would have been time barred); Enlow v. SalemKeizer Yellow Cab Co., 389 F.3d 802, 818-19 (9th Cir. 2004) ( Since Yellow Cab did not specifically plead the BFOQ defense in its motion for summary judgment, Yellow Cab effectively waived this defense. ); See also Scott v. Collins, 286 F.3d 923, 927-928 (6th Cir. 2002); Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 235 (7th Cir. 1991); Wholesale & Retail Food Distribution Local 63 v. Santa Fe Terminal Servs., 826 F.Supp. 326, 330 (C.D. Cal. 1993). D. Defendants Waived Any Affirmative Defense That They Did Not Assert During the Administrative Claims Process
Defendants cannot assert any affirmative defense other than the statute of limitations because they waived them by their failure to raise them at the administrative level. See Mitchell v. First Unum Life Ins. Co., 65 F.Supp.2d 686, 697 (S.D. Ohio 1998) ( the court will not consider arguments that the administrator failed to raise as a denial of the claim ) (citations omitted); O Bryhim v. Reliance Std. Life Ins. Co., 1996 U.S. Dist. Lexis 22109, at *9 (E.D. Va. 1996). Post hoc rationalizations for denial of ERISA claims are not permitted. Reich v. Ladish Co., Inc., 306 F.3d 519, 524 n. 1 (7th Cir. 2002) ( Ladish was required to give Reich every reason for its denial of benefits at the time of the denial. ) (citations omitted). See also 29 U.S.C. § 1133 (employee benefit plan must provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial... ). E. In Any Event, Defendants Laches Argument Has No Merit
them at summary judgment. (See Transcript of April 13, 2006 hearing, Doc. 155, pp. 42-44.)
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Defendants laches defense is equally unavailing and lacks even a remote possibility of success in this case. Laches is an equitable defense that prevents a plaintiff, who with Danjaq
full knowledge of the facts, acquiesces in a transaction and sleeps upon his rights.
LLC v. Sony Corp., 263 F.3d 942, 950 (9th Cir. 2001) (citations omitted). In 1995, Defendants identified only four post-1984 communications from the Defendants that even mentioned the SBA offset. Not one of those documents disclosed the Credited Interest rate issue upon which the anti-cutback claims are founded. Likewise, it was Defendants failure
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to notify Plaintiffs of their illegal 1993 Plan amendments that formed the basis of the Court s finding that Defendants violated both ERISA §204(g) and ERISA § 204(h). On this record, to suggest that 12,500 putative class members somehow slept on known rights goes well beyond the bounds of reason. Plaintiffs are suing for disclosure violations because Defendants did not produce critical plan documents, suggested those documents might never have existed and relied on a Plan document first produced during the administrative appeals process after Plaintiffs claims were already denied. If anyone was asleep at the switch, it
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was Defendants. The Ninth Circuit has made clear that any laches defense before the statute of limitations has run must rely on extraordinary circumstances not present here. Danjaq., 263 F.3d at 952-54 (party had actual knowledge that films released may have violated his copyright and yet took no action for periods ranging from nineteen to thirty-six years, although that party had taken legal action in England and against other defendants based on copyright claims). There has been no showing that any of the Plaintiffs or absent class
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members knew of the ERISA and plan violations at issue here, and as set forth herein, no such showing can be made. The Supreme Court has also held that Laches within the term of the statute of limitations is no defense at law. United States v. Mack, 295 U.S. 480, 489 (1935). See also Yoon v. Fordham University Faculty and Administration Retirement Plan, 2004 WL
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3019500, at *14 (S.D.N.Y.2004). ( Plaintiff's claims for pension contributions are at law, not at equity. The doctrine of laches is only a defense to actions at equity. Therefore, laches is no defense to Plaintiff's suit against the Plan. ) (citing United States v. Gordon, 78 F.3d 781, 786-87 (2d Cir.1996); Liebowitz v. Elsevier Science Ltd., 927 F.Supp. 688, 704 (S.D.N.Y.1996)). As Plaintiffs are suing to recover benefits and for violations of the terms of the Plan and ERISA, laches could not bar Plaintiffs legal claims. II. CLASS CERTIFICATION IS APPROPRIATE Plaintiffs have shown that this case was timely filed and that it is highly unlikely that Defendants could prevail on any affirmative defense especially given the absence of any class- wide communications that could be deemed to have put Plaintiffs on notice of their claims or constitute clear repudiation by Defendants of the claims asserted in this case. See Sullivan v. Chase Inv. Services of Boston, Inc., 79 F.R.D. 246, 264 (N.D. Cal.1978). Even
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if Defendants could somehow satisfy their burden to show the existence of an affirmative defense, under controlling Ninth Circuit precedent, class certification is nevertheless appropriate. In Williams v. Sinclair, 529 F.2d 1383 (9th Cir. 1976), the Ninth Circuit
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reversed a district court ruling that held that a statute of limitations defense necessitated separate determinations with respect to the date each of the class members learned or with reasonable diligence should have learned of the defendant s fraudulent activities: The existence of a statute of limitations issue does not compel a finding that individual issues predominate over common ones. Id. at 1388. The court held that [g]iven a sufficient
nucleus of common questions, the presence of the individual issue of compliance with the
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statute of limitations has not prevented certification of class actions in securities cases.
Id.
at 1388 (citing Umbriac v. American Snacks, Inc., 388 F.Supp. 265, 272 (E.D.Pa.1975); Cohen v. District of Columbia National Bank, 59 F.R.D. 84, 90 (D.D.C.1972); Lamb v. United Security Life Co., 59 F.R.D. 25, 34-37 (S.D.Iowa 1972); Dolgow v. Anderson, 43 F.R.D. 472 (E.D.N.Y.1968)). Defendants attempts to limit Williams to a case where the defense will not likely apply to many putative class members claims is not supported by the court s decision. There is zero evidence cited by the Ninth Circuit regarding the
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percentage of class members whose claims might or might not be barred as being outside the two year statute of limitations period. Likewise, in Cameron v. E. M. Adams & Co., 547 F.2d 473, 478 (9th Cir. 1976), the Ninth Circuit held that the predominance of the issue of the materiality of alleged misrepresentations was not defeated by questions of individual reliance or the statute of limitations: Similarly, our examination of the record in the instant case convinces us that, even if there exists questions of individual compliance with the Oregon statute of limitations, they are not sufficient, on balance, to negate the predominance of the common issues. A class action is here the superior means for a fair and
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efficient resolution of this controversy. Fed.R.Civ.P. 23(b)(3). The district court was in error in decertifying the classes. Id. See In re Visa Check/MasterMoney Antitrust Litigation, 280 F.3d 124, 138 (2d Cir. 2001)
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( the question for purposes of determining predominance is not whether a defense exists, but whether the common issues will predominate over the individual questions raised by that defense ); Waste Management Holdings, Inc. v. Mowbray, 208 F.3d 288, 296 (1st Cir. 2000) (citing 5 James Wm. Moore et al., Moore's Federal Practice § 23.46[3], at 23-210 to -211 (3d ed.1999)). The cases relied on by Defendants are distinguishable. For example, in Broussard v. Meineke Discount Muffler Shops, Inc.,155 F.3d 331, 337 (4th Cir. 1998), the Fourth Circuit announced a per se rule that is in conflict with the Ninth Circuit and the weight of authority11 and held that [t]he first obstacle to class treatment of this suit is a conflict of interest between different groups of franchisees with respect to the appropriate relief. Similarly,
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Daly v. Harris, 209 F.R.D. 180, 197 (D. Haw. 2002), also relied on by Defendants, is a case where the court was concerned about potential conflicts of interest and adequacy of class representatives due to the nature of relief sought. There are no conflicts here. Nor is this the easily distinguishable toxic tort case, where the issue of causation plays a central role
See Waste Management Holdings, 298 F.3d at 296 n.4 ( we respectfully reject the Fourth Circuit's suggestion that when the defendant's affirmative defenses (such as ··· the statute of limitations) may depend on facts peculiar to each plaintiff's case, class certification is erroneous. ...[T]he quoted statement, to the extent that it purports to establish a per se rule, contradicts the weight of authority and ignores the essence of the predominance inquiry. )(citing Broussard, 155 F.3d at 342)).
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in the class certification determination as in Defendants citation of Barnes v. American Tobacco Co.,161 F.3d 127, 144 (3d Cir. 1998). Causation is not an issue here. Like the securities actions in Williams, Cameron and, In re Visa, the issues of when Plaintiffs knew or should have known of Defendants violations of ERISA and the terms of the Plans do not predominate over the central questions and issues of this case. This case is manageable, Plaintiffs claims are typical12 and a class action is superior to all other actions.
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Plaintiffs have established that class certification is appropriate. Defendants have failed to sustain their burden to show that the statute of limitations would bar any of the claims in this case.13 Even if a statute of limitations defense could be determined to exist, it
Defendants claim that Plaintiffs do not satisfy the typicality because there are no common questions regarding Plaintiffs ...claim for penalties. Plaintiffs counsel requested documents on behalf of Plaintiffs and all others similarly situated. Defendants failed to provide documents in a timely manner. Plaintiffs counsel s requests for plan documents are the only requests at issue in the Complaint. There is nothing about these claims that are unique or individual and they do not require mini-trials. Defendants concerns about an opt-out option being provided to class members merely highlights the weakness of their position. Generally, under Rule 23(b)(2) a class member does not have a right to opt out, but the Court may provide for the opportunity to opt out under Rule 23(d)(2). In Molski v. Gleich, 318 F.3d 937, (9th Cir. 2003), the Ninth Circuit refused to adopt a per se rule requiring an opportunity to opt out of class actions seeking monetary damages, although it ordered an opt out notice to be provided because of the treble damage claim in that case. Id. ( Because the statutory damages in sections 52 and 54.3 provide for treble damages, they must be considered substantial. ). Here, unlike Molski, there is no treble damage claim. The monetary relief flows directly from the declaratory and injunctive relief. Given that Plaintiffs have already prevailed on what the Court has noted are the major claims in this case, Defendants reference to due process issues is not persuasive. It is difficult to see how the concern about a class member s right of action being extinguishable is present where the class member has already prevailed on the main issues of liability.
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would not negate the appropriateness of class certification here. As Fed. R. Civ. P. 23(d) makes clear, the Court is entitled to enter orders it deems appropriate to address any issues that may arise. Although it is highly unlikely that any affirmative defenses will require an individualized proceeding, in the event the Court were to determine that such issues exist, it can make such orders as are appropriate at that time. CONCLUSION For the foregoing reasons, Plaintiffs respectfully request an order certifying the class and subclasses and appointing Martin & Bonnett, P.L.L.C. as class counsel.
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Respectfully submitted this12th day of June, 2006.
MARTIN & BONNETT, P.L.L.C. By: s/Susan Martin Susan Martin Daniel L. Bonnett Jennifer L. Kroll 3300 North Central Avenue, Suite 1720 Phoenix, AZ 85012-2517 (602) 240-6900 Attorneys for Plaintiffs CERTIFICATE OF SERVICE I hereby certify that on June 12, 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:
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David B. Rosenbaum Dawn L. Dauphine Osborn Maledon, P.A. 2929 North Central Ave., Suite 2100 Phoenix, AZ 85012-2794 and : Michael Banks William Delaney John G. Ferreira. Azeez Hayne. Amy Promliso Morgan Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103
Attorneys for the Defendants
_s/Trudy Mahabir Trudy Mahabir
G:\WORK\Allied\Court\Pleadings\cert reply revised.wpd
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