Free Memorandum - District Court of Arizona - Arizona

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SUSAN MARTIN (AZ#014226) DANIEL L. BONNETT (AZ#014127) JENNIFER KROLL (AZ#019859) MARTIN & BONNETT, P.L.L.C. 3300 N. Central Avenue, Suite 1720 Phoenix, Arizona 85012-2517 Telephone: (602) 240-6900 Attorneys for Plaintiffs

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Barbara Allen; Richard Dippold; Melvin Jones; Donald McCarty; Richard Scates and Walter G. West, individually and on behalf of all others similarly situated, Plaintiffs, vs. Honeywell Retirement Earnings Plan; Honeywell Secured Benefit Plan; Plan Administrator of Honeywell Retirement Earnings Plan; and Plan Administrator of Honeywell Secured Benefit Plan, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

No. CV04-0424 PHX ROS Memorandum of Points and Authorities in Support of Plaintiffs Proposed Interim Rule 16 Scheduling Order and In Opposition to Defendants Proposed Interim Rule 16 Scheduling Order

In accordance with the Court s directive at the Rule 16 scheduling conference held on April 13, 2006, the parties have met and conferred and were unable to agree on a proposed interim Rule 16 order. Plaintiffs submit their proposed interim Rule 16 scheduling order, attached hereto as Exhibit A, and submit the following memorandum of points and authorities in support of their proposed interim Rule 16 scheduling order and in opposition to Defendants interim Rule 16 scheduling order .

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Memorandum of Points and Authorities Defendants proposed interim Rule 16 scheduling order would delay a hearing on the motion for class certification for at least an additional 180 days from entry of the proposed interim Rule 16 order. Defendants propose that they be allowed an additional 90 days from entry of the Court s interim Rule 16 scheduling order to engage in pre-certification discovery from absent class members represented by Plaintiffs counsel, including document requests and interrogatories and conducting up to 30 depositions of absent class members. They then propose that they be given 60 days to file another opposition to Plaintiffs class certification motion and that Plaintiffs then have 30 days to reply to both of Defendants oppositions to the class certification motion. Plaintiffs object to this proposal and submit that such additional extended proceedings are not warranted. Plaintiffs propose that the Court permit Plaintiffs to file their reply brief on class certification within two weeks following Defendants compliance with the Court s directive that Defendants respond to interrogatories and requests for production with respect to all class members within 60 days from the April 13, 2006 hearing. In the event that upon review of Plaintiffs reply brief the Court determines that further briefing by Defendants is warranted, that provision for additional briefing be made at that time. I. The Discovery Proposed by Defendants in their Proposed Interim Rule 16 Scheduling Order Would Unduly Delay Resolution of the Motion for Class Certification At the Rule 16 conference held on April 13, 2006, the Court asked Defendants

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Do you have a good faith basis to argue to the Court that the primary information to
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establish your affirmative defenses are going to come from the individualized Plaintiffs?
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(Transcript of Rule 16 proceedings, doc. 155, April 13, 2006, p. 49, ll. 12-15.) In response
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to Defendants counsel s affirmative representations to the Court that the information sought
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rests only in absent class members control, the Court indicated to Defendants that if they
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need documentation from the Plaintiffs, as you have indicated to me that s only in their possession custody and control, then you are entitled to that. (Id., p. 51, ll. 12-15.) Defendants have proposed to serve discovery demands that go well beyond seeking information that is necessary to oppose class certification or prove their affirmative defenses and that is only in [absent class members ] possession, custody and control. Plaintiffs and Defendants are still conferring on one of Defendants proposed requests for production, and Plaintiffs will alert the Court and request assistance when the parties have finished conferring in good faith regarding all matters presently in dispute. Because Defendants proposed discovery of absent class members impacts Defendants proposed interim Rule 16 scheduling order, a brief comment is submitted at this juncture. Defendants proposed requests for production of documents seek documents that are in Defendants possession custody and control, including plan documents, summary plan descriptions, notices and announcements, brochures and seminar and presentation materials (Defendants Proposed Request for Production no. 1).1 These materials could not be what Defendants were referring to when they represented to this Court that discovery was in the exclusive custody and control of the absent class members.

It is not rational to claim that the only way that Defendants can determine if they have a statute of limitations or laches defense is to have each absent class member produce copies of documents Defendants generated and distributed, especially because Defendants have failed to satisfy their burden to show that a particular document triggered the running of the statute of limitations. The Court has granted summary judgment in favor of Plaintiffs on their claims that Defendants violated ERISA by retroactively reducing their accrued benefits and that Defendants violated the terms of the Plan and ERISA by applying an SBA offset to the Many of these documents are already in evidence, having been submitted on the motion for summary judgment and on Defendants response to Plaintiffs motion for class certification.
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minimum benefits formula under the Plan. Because the Plan is a contract and Plaintiffs will be entitled to 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.) (en banc) (the controlling statute of limitations for an action to recover benefits is the state statute for claims on written contracts). See also Flanagan v. Inland Empire Elec. Workers Pension Plan & Trust, 3 F.3d 1246, 1252 (9th Cir. 1993) (applying state contract statute of limitations to claims for violations of ERISA s vesting rules, ERISA § 203(b)(3)(D), 29 U.S.C. § 1053(b)(3)(D)); May Dep t 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... ); Dameron v. Sinai Hosp. of Baltimore, Inc., 815 F.2d 975, 981 (4th Cir. 1987); Arena v. ABB Power T&D Co., 2003 U.S. Dist. LEXIS 13164, at *27-28, 31 Emp Ben Cas. (BNA) 1465 (D. Ind. 2003) (applying state contract statute of limitations to claims under § 204 of ERISA). A suit to enforce rights under a pension plan accrues, and the statute of limitations begins to run when there has been a clear and continuing repudiation of rights under the pension plan which is made known to the beneficiary. Martin v. Construction Laborer s Pension Trust, 947 F.2d 1381, 1394 (9th Cir. 1991). The ERISA statute of limitations invites a two-step analysis of accrual of an ERISA action, first isolating and defining the underlying violation upon which the claim is founded and determining when it occurred, then deciding when the plaintiff had actual knowledge of a breach or violation. Ziegler v. Conn. Gen. Life. Co., 916 F.2d 548, 550 (9th Cir. 1990). The Second Circuit recently confirmed that a cause of action does not accrue even if participants might have been aware that their benefits were lower than they had expected when the participants had no knowledge of the violation of the terms of the plan and ERISA effectuated by the defendants:

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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, Inc., 267 F.3d 181, 193 (2d Cir. 2001)). See Ziegler, 916 F.2d at 552 ( We stress that an ERISA plaintiff s cause of action cannot accrue and the statute of limitations cannot begin to run until the plaintiff has actual knowledge of the breach, regardless of when the breach actually occurred. ); Landwehr v. Dupree, 72 F.3d 726, 732 (9th Cir. 1995) ( limitations period begins to run on the date that the person bringing suit on behalf of the plan learned of the breach or violation ); Veltri v. Building Service 32B-JPension Fund, 393 F.3d 318, 324 (2d Cir. 2004). Miles v. New York State Teamsters Conference Pension & Retirement Fund Employee Pension Benefit Plan, 698 F.2d 593, 598 (2d Cir. 1983); Kosty v. Lewis, 319 F.2d 744, 750 (D.C. Cir. 1963) ( Until a defense was interposed in this case, we cannot say that appellant's claim was completely repudiated. Until that time, the Trustees were giving continuing consideration to appellant's eligibility. On these undisputed facts, this action is not barred by the statute of limitations. ). Defendants suggestions that any inquiry regarding any offset would be sufficient to trigger the statute of limitations is contrary to the test for accrual of a cause of action under

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ERISA. In order to prevail on their affirmative defense of statute of limitations, Defendants would have to prove that Plaintiffs had actual knowledge that the Defendants had unlawfully amended the Plans to reduce their accrued benefits or unlawfully applied the terms of the

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plan to reduce their accrued benefits, and that in response to claims that the plan was unlawfully amended and that the plan terms were unlawfully applied to reduce Plaintiffs accrued benefits, Defendants had clearly communicated to Plaintiffs their repudiation of Plaintiffs claims. This did not occur until at the earliest January 24, 2003 when Defendants initially denied Plaintiffs claims and Plaintiffs thereafter appealed to the Plan Administrator. Even where a claim is repudiated, the statute of limitations is tolled in an ERISA case absent

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notice to Plaintiffs that they have a right to appeal the denial of benefits and commence an action under ERISA. Veltri, 393 F.3d at 324 ( Because we hold equitable tolling appropriate where defendants fail to comply with the regulatory requirement that they provide notice to beneficiaries of the right to bring an action in court challenging a denial of benefits, we need not resolve precisely when the underlying cause of action accrues. ). Defendants have made no showing that any absent class members are in possession of materials constituting actual knowledge of the claims asserted in this case together with a repudiation of such claims by the Defendants coupled with notice of Plaintiffs rights to bring an administrative appeal or lawsuit under ERISA. By way of example, Defendants attempt to rely on the deposition testimony of Plaintiff Melvin Jones, (Defendants brief, p. 13), to assert that Mr. Jones was somehow on notice that the plan had been unlawfully amended or that the offsets had been unlawfully applied in contravention of the terms of the plan. His deposition testimony established neither. Mr. Jones testified that he asked the company benefits official conducting his exit interview about the offset of his benefits, to which the company official replied that s the way it was. (Declaration of Dawn Dauphine
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in Support of Defendants Opposition to Plaintiffs Motion for Class Certification, Exhibit C, at p21, ll.24-25 & p. 22 l. 8.) Moreover, in a portion of Mr. Jones testimony not included with Defendants declaration, Mr. Jones stated that with respect to the offsets, the company official 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. (Deposition of Melvin Jones, p. 25, ll. 36, attached hereto as Exhibit B.) There is nothing indicating that either the company

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representative or Mr. Jones had any knowledge that Defendants had amended the plans or illegally applied offsets to the minimum benefits formulas.2 On this record and at this stage of the proceedings, there are no grounds to postpone for 180 days, a hearing on the motion for class certification. Discovery of absent class members should be limited to producing documents relevant to Defendants affirmative defenses that are solely in absent class members possession, custody or control. On this record, there are no compelling reasons to permit the unusual and highly burdensome step of serving interrogatories or conducting

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depositions. Absent class member discovery is an exceptional procedure, as the Court recognized when it stated that Defendants are entitled to seek documents that are necessary and that are only in [absent class members ] possession, custody and control. See Alba Conte &

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Similarly, at the scheduling conference, although Defendants discussed activities by a handful of class members, including Barbara Allen, within the limitations period, and spoke of a submission to the Department of Labor within that same period, they have pointed to no evidence how that Department of Labor submission establishes knowledge of the unlawful reductions in accrued benefits and violations of the terms of the Plans asserted in this litigation.
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Herbert B. Newberg, Newberg on Class Actions § 16:2, at pp. 130-31 (4th ed. 2002) ( The trial court may use its discretion to limit discovery requests which are beyond the scope of class certification issues or to deny discovery altogether. ); Newberg on Class Actions § 16.1, at pp. 120-21; Cox v. American Cast Iron Pipe Co., 784 F.2d 1546, 1556 (11th Cir. 1986) ( Individual discovery directed to passive class members would normally be appropriate only at stage two of a Title VII suit, and then only rarely );Clark v. Universal

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Builders, 501 F.2d 324, 340-41 & n. 24 (7th Cir.1974) (absent class member discovery can only be appropriate if it is necessary; seeks information not known to movant, would not require the assistance of a lawyer or other expert to answer and is not directed toward winnowing the size of the class); Dellums v. Powell, 566 F.2d 167, 187 (D.C.Cir.1977); In re Publication Paper Antitrust Litigation, 2005 WL 1629633, at *1 -2 (D.Conn. 2005) ( Recognizing that such a step runs contrary to the general intention of Rule 23 to allow unnamed class members to remain passive, those courts that have allowed such discovery

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have required the defendant to (1) make a strong showing of the need for the particular discovery and (2) narrowly tailor its requests to its particular need, so as not to burden the absent members. ) (citing Laborers Local 17 v. Philip Morris, 1998 WL 241279 (S.D.N.Y. May 12, 1998); Town of New Castle v. Yonkers Contracting Company, Inc., 1991 WL 159848 (S.D.N.Y. Aug.13, 1991)); Mehl v. Canadian Pacific Railway, 216 F.R.D. 627, 631 (D. N.D. 2003) (denying motion to compel absent class member discovery and allowing only limited discovery from named plaintiffs as it pertains to the Rule 23 requirements ).

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Many of Defendants proposed document requests go beyond what Plaintiffs believe were fairly contemplated by the Court s allowance of discovery at the Rule 16 conference, including requests for Plan documents, any information and evidence concerning absent class members involvement in retiree clubs and evidence of any communications absent class members had with anyone concerning their retirement benefits. Many of Defendants document requests are overly broad and burdensome, seek documents in Defendants

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possession and cannot support Defendants claim that either the statute of limitations or laches3 defeat class certification or defeat Plaintiffs claims. Likewise Defendants proposal to serve interrogatories and request to conduct an additional 30 depositions (despite having already deposed the six named Plaintiffs) are burdensome and are premature. See Baldwin & Flynn v. National Safety Assoc., 149 F.R.D. 598, 600 (N.D. Cal. 1993) ( The burden is heavy to justify asking questions by interrogatories, even heavier to justify depositions. ). When the Court granted Defendants leave to conduct discovery of absent class members, Plaintiffs do not believe it was

Defendants cite a Ninth Circuit case for the proposition that laches can, in extraordinary circumstances, defeat a cause of action even if the statute of limitations has not run. Danjaq LLC v. Sony Corp., 263 F.3d 942, 952-54 (9th Cir. 2001). Even if that were the case, the circumstances of Danjaq are completely absent here. There, it was undisputed that a 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 his copyright claims. There has not even been a preliminary showing that any of the Plaintiffs or absent class members knew of the ERISA and plan violations at issue here.
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sanctioning a search for a needle in the haystack. As the Court recognized, one, or even a handful, of needles would not impact class certification. II. Proposed Additional Briefing by Defendants and the Proposed Schedule is Unwarranted In their proposed interim Rule 16 scheduling order, Defendants have requested an additional 150 days in which to serve discovery and file another opposition to Plaintiffs motion for class certification. At the scheduling conference, the Court instructed that Defendants should respond to Plaintiffs discovery within two months and that Plaintiffs should file their reply in support of their motion for class certification within two weeks

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following Defendants production of discovery relating to class certification. (Transcript of Rule 16 proceedings, doc. 155, April 13, 2006, p. 51, ll. 1-6.) Defendants proposed 180

day delay in the class certification proceedings in order to accommodate Defendants request to file another opposition to Plaintiffs motion for class certification is inappropriate and would needlessly delay resolution of the class claims.4 Accordingly, Plaintiffs respectfully request that their proposed interim Rule 16 scheduling order, attached hereto as Exhibit A,

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If during the course of discovery, Defendants wish to move for reconsideration of the order on class certification, the rules are flexible and provide for revisiting of the class certification, if appropriate. Federal Rule of Civil Procedure 23(d) states that the court's orders "may be altered or amended as may be desirable from time to time." This passage emphasizes the judicial flexibility that characterizes the entire subdivision. Wright & Miller § 1791.
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which Plaintiffs believe follows the Court s direction at the scheduling conference be adopted.

Respectfully submitted this 4th day of May, 2006 MARTIN & BONNETT, P.L.L.C.

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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

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CERTIFICATE OF SERVICE I hereby certify that on May 4, 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:

Michael L. Banks, Esq. William J. Delany, Esq. Amy Promislo Covert, Esq. John G. Ferreira, Esq. Azeez Hayne, Esq. Morgan Lewis & Bockius LLP and David B. Rosenbaum Dawn L. Dauphine OSBORN MALEDON, P.A.

s/Susan Martin

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