Free Response in Opposition to Motion - District Court of Arizona - Arizona

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Ed Hendricks. (Arizona Bar No. 002359) Michael K. Dana (Arizona Bar No. 019407) MEYER, HENDRICKS & BIVENS, P.A. 3003 North Central Avenue, Suite 1200 Phoenix, Arizona 85012-2915 Telephone Number: (602) 604-2200 C. Frederick Reish (Arizona Bar No.: 002408) Michael A. Vanic (California Bar No.: 073486) (pro hac vice) REISH LUFTMAN REICHER & COHEN 11755 Wilshire Boulevard, 10th Floor Los Angeles, CA 90025-1539 Telephone Number: (310) 478-5656 Attorneys for Defendants Charles M. Brewer, Charles M. Brewer, Ltd. Profit Sharing Plan and Trust, Charles M. Brewer, Ltd. Restated Pension Plan UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Stuart J. Reilly, Plaintiff, vs. Charles M. Brewer, Ltd., Profit Sharing Plan and Trust, a retirement plan; Charles M. Brewer, Ltd. Restated Pension Plan, a retirement plan; Ross Gordon and Associates, Inc., a corporation; and Charles M. Brewer, Defendants. Defendants Charles M. Brewer, Charles M. Brewer, Ltd. Profit Sharing Plan and Trust, and Charles M. Brewer, Ltd. Restated Pension Plan (collectively, the "Brewer Defendants") hereby respond in opposition to Plaintiff's Motion For Partial Summary Judgment Re: Defined Benefit Plan Termination Pursuant To Fed.R.Civ.P. 56(A); Or For An Order Under Fed.R.Civ.P. 56(D) That Certain Facts Are Without Substantial Controversy. This Response is supported by the accompanying Memorandum of Points and Authorities. CASE NO.: CIV 02 2218 PHX EHC RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT RE: DEFINED BENEFIT PLAN TERMINATION PURSUANT TO FED.R.CIV.P. 56(a); OR FOR AN ORDER UNDER FED.R.CIV.P. 56(d) THAT CERTAIN FACTS ARE WITHOUT SUBSTANTIAL CONTROVERSY

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MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION

Plaintiff Stuart Reilly has belatedly filed a motion "for partial summary judgment regarding termination of the Charles M. Brewer, Ltd. Restated Pension Plan on November 30, 1992," purportedly pursuant to Fed. R. Civ. P. 56(a). (Motion 1:18-20, 2:11-16.)1 However, Rule 56(a) does not provide a basis for Plaintiff's Motion since the Motion does not purport to dispose of any particular claim asserted by Plaintiff. Plaintiff's Third

Amended Complaint ("TAC") sets forth two claims: a claim for Plan benefits under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B) (Count One), and a claim for individualized equitable relief for breach of fiduciary duty under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(2) (Count Two). Plaintiff does not suggest in his Motion that summary judgment can be entered on either claim as a result of the Motion. He simply states, without

explanation or elaboration, that "[t]he termination/merger issue substantially impacts the manner in which Plaintiff's pension benefits are calculated." (Motion 2:8-9.) Because the Motion is not one that may dispose of any claim under Fed .R.Civ. P. 56(a), it is not authorized by that rule. Furthermore, the Motion is devoid of substantive merit as it is based on an intentionally incomplete presentation of facts, a parsing of documents highlighting certain sections but intentionally disregarding other more relevant sections, and a misunderstanding of the relevant law. Plaintiff contends that the "[u]ncontroverted evidence establishes that the Pension Plan was terminated on November 30, 1992." (Motion 3:9-10.) In fact, the complete uncontroverted evidence establishes that (1) the Plan sponsor, Charles M. Brewer, Ltd. ("Brewer Ltd.), made the settlor decision to perform a trust-to-trust transfer of the assets and liabilities of the Pension Plan into the PS Plan (i.e., a merger of the Pension Plan __________________________

References to "Motion" are to Plaintiff's Motion for Partial Summary Judgment Re: Defined Benefit Plan Termination Pursuant to Fed. R. Civ. P. 56(a); Or For An Order Under Fed. R. Civ. P. 56(d) That Certain Facts Are Without Substantial Controversy. 2

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into the PS Plan), not a termination of the Pension Plan by a distribution to the participants, and (2) the transfer of assets from the Pension Plan to the PS Plan and the merger were reported to the IRS. (See generally Brewer CSOF.)2 Accordingly, the factual and implicit legal predicates for Plaintiff's Motion are also without merit. Hence, Plaintiff's Motion should be denied. II. (CSOF, BDUF., ¶ 1.)3 STATEMENT OF RELEVANT FACTS

In November, 1992, the Pension Plan was amended to freeze further benefit accruals. At that time, Brewer Ltd., as Plan sponsor, was considering

terminating or merging the Pension Plan into the PS Plan. Brewer Ltd. did not want to terminate the Pension Plan outright and make early distributions to its participants because it was Brewer Ltd.'s view that the Plan was created to provide pension benefits for its participants, and Brewer Ltd. was concerned that early distributions (which were not otherwise permitted under the Pension or PS Plan at that time) might defeat the primary purpose of the Plan for its participants. (Id. ¶ 2.) Brewer Ltd. was advised in connection with its consideration regarding termination or merger by Jay Beltz of Ross Gordon. (Id. ¶ 3.) Ultimately, Brewer, Ltd. made the Plan sponsor/settlor decision that the Pension Plan would not be terminated with distributions to the participants at that time, but rather that the Pension Plan assets would be transferred to the PS Plan effecting a merger. (Id. ¶ 4.) In May, 1995, the Pension Plan and PS Plan were merged into the PS Plan. (Id. ¶ 5.) On August 15, 1995, Mr. Beltz prepared and filed with the Internal Revenue Service a Form 5310-A, "Notice of Plan Merger or Consolidation, Spin Off, or Transfer of Plan Assets or Liabilities; Notice of Qualified Separate Lines of Business." (Id. ¶ 6.) The filing of this Form was consistent with, and required by, both the qualified plan rules and Pension Plan __________________________
All references to "Brewer CSOF" are to the Brewer Defendants' Controverting Statements of Fact In Opposition To Plaintiff's Motion For Partial Summary Judgment Re: Defined Benefit Plan Termination Pursuant To Fed.R.Civ.P. 56(a); Or For An Order Under Fed.R.Civ.P. 56(d) That Certain Facts Are Without Substantial Controversy, filed and served concurrently herewith under separate cover.
3

2

All references to "BDUF." are to the Brewer Defendants' Uncontroverted Facts set forth at pages 6 to 17 of the Brewer CSOF. The specific evidentiary support for each BDUF is set forth therein. 3

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Section 10.1, "Merger, Consolidation or Transfer of Assets, Requirements," which provided as follows: Before this Plan can be merged or consolidated with any other qualified plan or its assets or liabilities transferred to any other qualified plan, the Administrator must secure (and file with the Secretary of Treasury at least 30 days beforehand) a certification from a government-enrolled actuary that the benefits which would be received by a Participant of this Plan, in the even of a termination of the Plan immediately after such transfer, merger or consolidation, are at least equal to the benefits the Participant would have received if the Plan had terminated immediately before the transfer, merger or consolidation, and such transfer, merger or consolidation does not otherwise result in the elimination or reduction of any `Section 411(d)(6) protected benefits' as described in Section 8.1. (Id.) Significantly, the Form 5310-A is used only in connection with a plan merger, consolidation, spin off, or transfer of plan assets or liabilities from one qualified plan to another qualified plan. It is not used, and cannot be used, in the case of a termination of a plan by distribution of its assets to its participants. (Id. ¶ 7.) Form 5310-A advised the IRS of the merger of the Pension Plan into the PS Plan, describing the Pension Plan as a defined benefit plan and the PS Plan as a defined contribution Plan through the use of the IRS' codes. (Id.)
4

Consistent with the Form 5310-A previously filed with the IRS and with Mr. Beltz's understanding and instruction that all of the assets of the Pension Plan be transferred to the PS Plan, the "final" Form 5500-C/R for the Plan year ended November 30, 1995 stated at line 10c that a Form 5310-A had been filed and further specifically stated on Line 28(i) of the form that the remaining Pension Plan assets were to be handled pursuant to a "Transfer of Assets to Profit Sharing Plan." (Id. ¶¶ 8-9.) The filing of a final Form 5500-C/R for the plan year ending November 30, 1995, was absolutely consistent with a transfer of assets or liabilities, a merger, a consolidation, or __________________________
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The Form 5310-A is attached as Exhibit "A" to the Beltz Decl. filed and served concurrently herewith. 4

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a spin off of assets to another plan. (Id. ¶ 10.) The filing of a final Form 5500 is not limited to a plan termination where the assets are distributed to the plan participants. (Id.) Rather, a final Form 5500 is filed for the last year in which a plan had assets. (Id.) Brewer, Ltd.'s filing of a favorable Determination Letter Application (Form 5310) with the IRS, and receipt of a favorable determination letter ruling pursuant to that application, did not effect a "termination" of the Pension Plan in the sense that Plaintiff suggests. (Id. ¶ 11.) There was no legal obligation on the part of Brewer, Ltd., as the ERISA Administrator and fiduciary of the Pension Plan, to effect plan termination in any particular manner as a result of the favorable determination letter. (Id.) The favorable ruling on plan termination received by the Pension Plan did not require that the assets be distributed to the participants. (Id.) The favorable determination letter merely sets forth the IRS pronouncement that "your termination of this plan does not adversely affect its qualification for Federal tax purposes." (Id.) The Form 5310 Application and the favorable determination letter were not inconsistent with the termination of the Plan through the trustto-trust transfer and/or merger. (Id.) For purposes of preparing the Termination Documentation, Mr. Beltz used standardized forms and letters, which generically refer to a plan termination. (Id. ¶ 12.) All of the forms and letters he routinely used to cover a plan termination, a plan merger, a plan consolidation, a plan spin off, or a transfer of plan assets and liabilities to another qualified retirement plan, simply referred generically to a plan termination. (Id.) Indeed, in the retirement plan industry, the word "termination" is used not only to refer to the case where a plan ceases to exist because all assets have been distributed to the plan participants, but also to the case where a plan ceases to exist due to a plan termination, a plan merger, a plan consolidation, a plan spin off or a transfer of assets and liabilities to another qualified retirement plan. (Id. ¶ 24.) Thus, the references to plan termination in these forms and letters were intended to cover all transactions resulting in the complete extinguishment of assets in a retirement plan trust (i.e., a plan "termination") and were therefore consistent with the termination of the
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Pension Plan through a trust-to-trust transfer and/or merger of its assets into the PS Plan. (Id. ¶ 12.) Accordingly, to the extent the word "termination" was used in connection with the Termination Documentation, it accurately described the ultimate result, which was a direct transfer of assets from the Pension Plan to the Profit Sharing Plan and, thus, a cessation or "termination" of the Pension Plan. (Id.) However, a direct trust-to-trust transfer does not, and did not here, result in a distributable event as defined by the Pension Plan document. (Id.) Article V of the Pension Plan document provides for distributions to Pension Plan participants only on the occurrence of death, disability, or termination of employment after having attained normal retirement age (age 65, or the participant's 5th anniversary of joining the Pension Plan, if later). (Id. ¶ 13.) Since none of these events occurred with respect to Mr. Reilly or any other Pension Plan participants prior to the date the Pension Plan transferred all of its assets to the Profit Sharing Plan, none of the Pension Plan participants were entitled to a distribution of their benefits. (Id.) In connection with the merger in November, 1995, neither the Pension Plan nor the PS Plan purchased paid-up individual annuity contracts for the Plan participants guaranteeing the payment of the transferred benefits in accordance with the terms of the Pension Plan. (Id. ¶ 14.) Nor was Mr. Brewer ever advised by Mr. Beltz, or anyone else, that the PS Plan should purchase paid-up individual annuities. (Id.) Effective November 1, 2000, the PS Plan was amended to permit distributions to terminated employees before their normal retirement age. (Id. ¶ 15.) Brewer Ltd., as plan sponsor, decided to amend the PS Plan to permit early distributions because Mr. Beltz advised that the lack of employer contributions and the increasing difficulty with plan administration (e.g., locating former employees to provide annual statements) were creating potential issues that would be resolved by such an amendment. (Id. ¶ 16.) Mr. Reilly then requested a lump sum distribution of his Plan benefits. (Id. ¶ 17.) On November 29, 2000, the PS Plan made a lump sum distribution to Mr. Reilly in the amount of $604,865.39. (Id. ¶ 18.) The amount of Mr. Reilly's benefit was calculated
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by Ross Gordon. (Id.) Mr. Brewer relied upon Ross Gordon to accurately calculate Mr. Reilly's benefits. (Id.) Of the $604,865.39 benefit, $516,525.96 was attributable to Mr. Reilly's Pension Plan benefit and the balance, $88,339.43, was attributable to his PS Plan benefit. (Id.) Mr. Reilly's $604,865.39 benefit was offset by the total of the principal and accrued interest on his $10,000, $40,000, $233,141, and $29,000 plan loans that was calculated by Ross Gordon and determined to equal $600,982.50. (Id.) The balance of Mr. Reilly's benefit, after offset for his loans, was paid to the IRS by the Plan pursuant to a tax levy received by the Plan. (Id.) Ross Gordon erred in calculating Mr. Reilly's benefit at the time of the November 2000 distribution because it failed to preserve the defined benefit features of the Pension Plan after the merger, as required under the circumstances by ERISA § 204(g), 29 U.S.C. § 1054(g), and because it failed to properly calculate the amount of Mr. Reilly's Pension Plan benefit as of the date of the merger in 1995. (Id. ¶ 19.) Mr. Piper, an actuary engaged by the Brewer Defendants after this action was filed, recalculated Mr. Reilly's benefit, preserving the defined benefit feature of his Pension Plan benefit after the trustee-to-trustee merger of the Pension Plan assets into the PS Plan and also correcting the error Ross Gordon made in calculating Mr. Reilly's Pension Plan benefit as of the date of merger in 1995. (Id. ¶ 20.) Consequently, during the course of this action, Mr. Reilly received additional distributions of his Plan benefits in the total amount of $276,054.51, through the payment on December 30, 2003 of $158,826.66 to Smith Barney as IRA Custodian for Stuart J. Reilly and the payment on May 13, 2004 of $117,224.85 to Smith Barney as IRA Custodian for Stuart J. Reilly. (Id. ¶ 21.) The $276,054.51 amount represented the total benefit due and unpaid to Mr. Reilly when his benefit was recalculated, preserving the defined benefit feature with respect to his Pension Plan benefit and correcting the calculation error made by Ross Gordon. (Id. ¶ 22.) No other benefit is owed to Mr. Reilly from the Pension Plan or the PS Plan. (Id.) In the end, as a result of the distributions made to Mr. Reilly in 2000, 2003 and 2004, Mr. Reilly has received benefit distributions totaling $880,916 ­ $604,865.39 in November, 2000, $158,826.66 in December, 2003, and
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$117,224.85 in May, 2004. (Id. ¶ 23.) III. A. ARGUMENT

Basic Principles Regarding Summary Judgment. Summary judgment can be granted only where "the pleadings, depositions, answers

to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issues as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The court must draw all inferences in favor of

the nonmoving party, including questions of credibility and the weight to be accorded particular evidence. Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 520 (1991). B. Plaintiff's Motion Does Not Seek To Dispose Of Any Particular Claim In Its Entirety And Therefore Is Not Authorized Under F.R.Civ.P. 56(a). As noted in the Introduction hereto, Plaintiffs' TAC purports to set forth a claim for Plan benefits and a claim for individualized equitable relief under ERISA. However, Plaintiff's Motion does not seek to dispose of either claim in its entirety. Rather, it appears to seek a determination that certain facts (and, implicitly, certain unstated legal conclusions) are not in dispute. Plaintiff argues that "[t]he termination/merger issue substantially

impacts the manner in which Plaintiff's pension benefits are calculated." (Motion 2:8-9.) However, nowhere does Plaintiff endeavor to explain how or why he believes this is so. Moreover, this contention has no foundation in Plaintiff's TAC which prays for "the loss in value of his Sec. 411(d)(6) protected benefits plus interest at the legal rate from the date of distribution." (TAC 7, Prayer, ¶ 1)5 Although Plaintiff suggests that his Motion is appropriate under Fed .R. Civ. P. 56(a), it is clear that it is not. Rule 56(a) provides in relevant part: A party seeking to recover upon a claim, counterclaim or cross-claim or to obtain a declaratory judgment may ... move with or without supporting affidavits for a summary judgment in the party's favor upon all or any part thereof.
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__________________________

As demonstrated above, the Plan has conceded its error in failing to protect Plaintiff's benefit after the merger and has already corrected this error by recalculating and paying the full benefit. 8

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Plaintiff has misinterpreted the "all or any part thereof" language of Rule 56(a) to provide him a vehicle for piecemeal or fragmented resolution of a non-dispositive item which he now contends is an issue within his benefit claim. However, Rule 56(a) cannot be used for that purpose. "Rules 56(a) and 56(b) simply do not permit the piecemealing of a single claim or the type of issue narrowing sought here .... [D]espite Rule 56(a)'s reference to `all or any part' of a claim, the Rule authorizes only the granting of appealable `judgments' disposing of entire claims." Arado v. General Fire Extinguisher Corp., 626 F.Supp. 506, 509

(N.D.Ill. 1985); see, also: Felix v. Sun Microsystems, Inc., 2004 W.L. 911303, *7 (D. Md. 2004) (holding that the motion to determine Plaintiff's alcoholism was a disability under ADA but not seeking judgment on ADA claim was "an improper usage of Fed.R.Civ.P. 56."); City of Wichita v. United States Gypsum Co., 828 F.Supp. 851, 869 (D. Kan. 1993) (the "all or any part" language in Rule 56(a) authorizes the granting of summary judgment with respect to all claims in an action or only some claims in a multiple claim action, but a party is not entitled to summary judgment if the judgment would not be dispositive of an entire claim). Simply stated, summary judgment is not "a vehicle for fragmented adjudication of non-determinative issues." SEC v. Thrasher, 152 F.Supp.2d 291, 295 (S.D.N.Y. 2001). Thus, determining the issue of the alleged "impact" on a benefit calculation is not a basis for summary judgment under F.R.Civ.P. 56(a).6 Furthermore, Plaintiff's effort to bootstrap an order under Fed. R. Civ. P. 56(d) on the back of its meritless Rule 56(a) motion is also procedurally defective. "A party is simply not entitled to summary judgment if the judgment would not be dispositive of an entire claim. Moreover, a party may not attempt to use Rule 56(d) to evade the restriction __________________________
6

Nor, obviously, is it a basis for an interlocutory order under Rule 56(c) which permits "summary judgment, interlocutory in character ... on the issue of liability although there is a genuine issue as to the amount of damages." 9

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in Rule 56(a) because Rule 56(d) does not authorize independent motions to establish certain facts are true." Felix v. Sun Microsystems, Inc., 204 WL 911203, *7 (emphasis added), citing City of Wichita, 828 F.Supp at 869; Arado, 626 F.Supp at 509; Nye v. Roberts, 159 F.Supp.2d 207, 210 (D.Md. 2001).7 Accordingly, Plaintiff's Motion is not authorized by Fed. R. Civ. P. 56(a) or 56(d) and, therefore, must be denied. And, as previously noted, and as demonstrated below, it is also devoid of substantive merit and must be denied on that basis as well. C. Triable Issues Of Fact Preclude The Order Regarding Termination Of The Pension Plan Sought By Plaintiff. Plaintiff's Motion is based on a fabric of incomplete and distorted "facts." When all relevant facts are presented, it is clear that the uncontroverted evidence demonstrate that Plaintiff's Motion should be denied. The full and complete relevant uncontroverted facts are set forth in Brewer's SSGI and above. In brief, they establish that Brewer Ltd. had two employee retirement plans in the early 1990s; that Brewer Ltd., as Plan sponsor, was considering terminating the Pension Plan or merging it into the PS Plan at that time; and that Brewer Ltd. ultimately decided to merge the Plans through a Trustee-to-Trustee transfer of the Pension Plan's assets and liabilities from the Trustee of the Pension Plan to the Trustee of the PS Plan. The facts also establish that Brewer Ltd. reported that merger to the IRS by filing the requisite Form 5310A (a form used only in connection with a plan merger, consolidation, spin off, or transfer of plan assets or liabilities and not with terminations of plans resulting in distributions to participants) and a final Form 5500-C/R that specifically stated that the Form 5310-A had __________________________
There is a split of authority regarding whether independent motions are permitted under Fed. R. Civ. P. 56(d). See Schwarzer, Tashima & Wagstaffe, California Practice Guide, Federal Civil Procedure Before Trial (TRG 2004), Summary Judgment, §§14:44-14:46. The better view, which is supported by the express language of the Rule, is that there is no such thing as an independent motion under Rule 56(d). Arado v. General Fire Extinguisher Co., 626 F.Supp. at 509; Capitol Records v. Progress Record Distrib., Inc., 106 F.R.D. 25, 30 (N.D.Ill. 1985); SEC v. Thrasher, 152 F. Supp.2d at 297. In Thrasher, the court made the point simply and directly, stating: "The plain language of [Rule 56(d)] is clear, permitting courts to issue orders narrowing trial issues only `[if] on motion under this rule judgment is not rendered upon the whole case or for all of the relief asked."
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been filed and that the remaining Pension Plan assets were to be handled pursuant to a "Transfer of Assets to Profit Sharing Plan." Plaintiff's decision not to present to the Court the Form 5310-A is neither guileless nor inadvertent. Plaintiff's knowledge about the fact of the filing of the Form 5310 cannot be doubted. He alleged that the Brewer Defendants "filed Form 5310A Notice of Plan Merger with the IRS on August 15, 1995." (TAC 4, ¶ XVI.) Plaintiff did not present that fact to the Court in connection with this Motion because it is a fact that clearly controverts his argument that the Pension Plan was terminated on November 30, 1992 in a manner that would have required a distribution to him. Plaintiff also created a separate exhibit (Exhibit 7 to his Separate Statement), which was a portion of the final Form 5500, in order to highlight the portions of that document, which he erroneously believes supports his position. (See Plaintiff's Separate Statement of Facts ("PSOF"), ¶ 7.) At the same time, Plaintiff failed to bring to the Court's attention the portions of the full, final Form 5500 (Exhibit 6 to PSOF), which clearly controvert his argument: line 10c stating that a Form 5310-A had been filed and Line 28(i) indicating that the remaining Pension Plan assets were to be handled pursuant to a "Transfer of Assets to Profit Sharing Plan." 8 In short, not only has Plaintiff misinterpreted the facts that he has presented, but he has intentionally distorted and misrepresented the true facts through omission. Such sleight of hand should not be countenanced. Based on all the facts, the evidence is uncontroverted that the Pension Plan was merged into the PS Plan through a trust-to-trust transfer in 1995, and that the merger did not require a distribution to the participants at that time. (See Generally Brewer CSOF.) D. Even If The Court Were To Disregard All The Relevant Facts And Focus Only On The "Facts" Presented By Plaintiff, As A Matter Of Law, The Motion Cannot Be Granted Because It Is Based On False Legal Premises. A further fundamental problem with Plaintiff's Motion is that it is based on several __________________________

8

Thus, it is apparent that Mr. Reilly falsely represented to the Court that: "In short, if the Defendants canceled or revoked the termination of the Pension Plan, they did not tell the IRS." (Motion, 4:12-13.) 11

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incorrect, implicit legal premises.9 Plaintiff's assertion that the Plan was terminated on November 30, 1992, implies, first, that somehow the Plan sponsor was irrevocably locked in to termination and distribution of the assets to the participants as a result of considering and possibly starting that process, and, second, that somehow termination occurred as a matter of law on the basis of the "facts" Plaintiff presents. Both implicit legal conclusions are incorrect. 1. The decision to merge, terminate, and/or amend was a settlor decision that the Plan sponsor was free to make and free to change in its own interests.

At the relevant time, the Pension and PS Plans did not permit distributions to participants prior to normal retirement age except in the case of disability or death. Brewer Ltd. considered terminating or merging the Pension Plan into the PS Plan, but was disinclined to terminate the Pension Plan outright, and make early distributions to its participants, because Brewer Ltd. created the Plan to provide retirement benefits for its participants and was concerned that early distributions (which were not otherwise permitted under the Pension or PS Plan at that time) might defeat the primary purpose of the Plan for its participants. Thus, Brewer Ltd. ultimately decided to do the merger and a trust-to-trust transfer rather than an outright termination. As Plan sponsor, Brewer Ltd. had that right. Decisions to merge plans, like decisions to create, modify, amend, and terminate plans, are business decisions or functions of the plan sponsor ­ not fiduciary functions. Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995) ("Employers or other plan sponsors are generally free under ERISA for any reason at any time, to adopt, modify, or terminate ... plans" (emphasis added)); Lockheed Corp. v. Spink, 517 U.S. 882 (1996); Malia v. Gen. Elec. Co., 23 F.3d 828, 833 (3rd Cir. 1994) ("Efforts by an employer to merge two plans do not invoke the fiduciary duty provisions of ERISA."); Sutter v. BASF __________________________
9

The Court will note that, with the exception of the argument related to Rule 56, Plaintiff's Motion fails to provide citation to a single legal authority or make any legal argument leaving it to the Court and Defendants to guess what precisely is the legal significance of, or legal basis for, the issues that he requests be decided. (See Motion, Argument, 3-5] 12

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Corp., 964 F.2d 556, 562 (6th Cir 1992) (sponsor's decision to merge plans is business, not fiduciary, decision). Accordingly, Brewer Ltd., as Plan sponsor, was free to make the business decision whether to terminate or merge the Pension Plan, and participant consent for a trustee-to-trustee transfer and merger was not required. Id.; see also Sys. Council ME3 v. AT&T Corp., 972 F.Supp. 21, 32 (D. D.C. 1997) ("the transfer of assets does not involve the `management or disposition' of plan assets which triggers ERISA's fiduciary protections."). Once merged, all that was required was that the merged Plan protect (i.e., continue) the defined benefit feature of the Pension Plan benefit going forward. IRC § 411(d)(6) (prohibiting elimination of a protected benefit);10 see also Berger v. Mazametz, 157 F.Supp.2d 998 (S.D. Ill. 2001) ("ERISA allows a plan to have both a defined contribution portion and a defined benefit portion") and 26 C.F.R. § 1.411(d)-4, A-3(a)(2).11 Plaintiff appears to suggest that Brewer Ltd. lost its ability to change its mind once having considered terminating the Pension Plan or once having started the process of terminating it. Plaintiff is wrong. First, Plaintiff misinterprets some of the facts and disregards others. The evidence is that the initial actions taken were consistent with either a merger and trust-to-trust transfer or a termination, and that subsequently, once Mr. Beltz understood the decision was made to transfer assets and merge, the actions taken thereafter12 were consistent only with the merger and not a termination and distribution to participants. Second, as a matter of law and simple logic, a plan sponsor's decision to terminate and then not to terminate a plan are both non-fiduciary, settlor decisions, and the __________________________
10

The PS Plan provision requiring the purchase of annuities in the event of merger with a defined benefit plan is a means of "protecting" the benefit via an annuity.

11

Defendants have conceded that the PS Plan initially failed to protect the defined benefit feature after the merger; however, that post merger failure has subsequently been corrected by Mr. Piper's recalculation of the participants' benefit, providing for the defined benefit feature in the PS Plan on a going forward basis, and the payment of the participants based on his recalculation.

These facts include, but are not limited to, the filing of the Form 5310-A and Form 5500 referencing the Form 5310-A and the trust-to-trust transfer from the Pension Plan to the PS Plan of the Pension Plan's assets and liabilities. 13

12

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plan sponsor is free to make those decisions based on its own business judgment. See Van Orman v. Am. Ins. Co., 608 F.Supp. 13, 22-23 (D. N.J. 1984) (decision to terminate or not to terminate and the decision to reactivate plan are non-fiduciary); Fenster v. Spitz, 301 F.3d 851, 858 (7thCir. 2002) ("Although ERISA imposes fiduciary duties on employers with respect to the management of plan assets, it does not require an employer to act in a fiduciary capacity when the employer abolishes or amends a benefits plan or in this case declines to abolish a plan"). 2. A plan is not terminated by obtaining a favorable determination letter.

Mr. Reilly seems to suggest that obtaining a favorable determination letter with regard to termination constitutes termination or mandates termination. Tellingly, he has not presented the Court with any authority for that assertion and, indeed, none exists. Further, there is nothing in the Form 5310 instructions suggesting that completion of the Form effects a termination. A favorable determination letter, itself, merely provides the IRS pronouncement that "your termination of this plan does not adversely affect its qualification for Federal tax purposes." (Brewer's CSOF, BDUF. ¶ 11.) Moreover, there is nothing in the law that requires a plan sponsor to carry through on a proposed termination if the plan sponsor has changed its mind. In fact, as set forth above, there is clear authority to the contrary. Finally, a plan "termination" does not occur in any event until the assets have been distributed from the plan to the participants ­ an event that did not occur in the case of the Pension Plan. See Rev. Rul. 89-87, 1989-2C,B. 81, 1989-27 I.R.B. 5 (held that a retirement plan under which benefit accrual has ceased is not terminated if, after an amendment is adopted to terminate the plan, the plan assets are not distributed as soon as administration is administratively feasible);13 see also 26 C.F.R. § 1.411(d)-2(c)(3) ("a plan is not terminated, __________________________
13

In its analysis in this Revenue Ruling, the IRS also stated: In order to terminate a qualified plan, the date of termination must be established, the benefits of the plan participants and other liabilities under the plan must be determined with respect to the date of plan termination, and all plan assets must be distributed to satisfy those liabilities in accordance

(Cont'd)

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for example, merely because an employer consolidates or replaces that plan with a comparable plan"); Rev. Rul. 69-157 (a plan is not considered terminated in fact where the plan continues in effect until all the assets have been distributed to participants in accordance with the terms of the plan). Accordingly, as a matter of law, the Pension Plan was not terminated on November 30, 1992 or in 1995 in a manner requiring a distribution of benefits to the participants. IV. CONCLUSION

Plaintiff's eleventh-hour Motion is without procedural or substantive merit and should be denied. The facts upon which it is based are controverted and it lacks legal merit. Significantly, Plaintiff makes no effort whatsoever to articulate a legal basis for the orders he requests because none exists. DATED this 8th day of November, 2005. MEYER, HENDRICKS & BIVENS, P.A.

By:

s/Ed Hendricks Ed Hendricks Michael K. Dana 3030 North Central Avenue, Suite 1200 Phoenix, Arizona 85012-2915 -and-

REISH LUFTMAN REICHER & COHEN C. Frederick Reish Michael A. Vanic 11755 Wilshire Boulevard, Tenth Floor Los Angeles, California 90025-1539 Attorneys for Defendants Charles M. Brewer, Ltd. and Charles M. Brewer
(Cont'd)
with the terms of the plan as soon as administratively feasible after the date of termination. ... A plan that is amended to terminate and to cease benefit accruals has not, in fact, been terminated under the Code if the assets are not distributed as soon as administratively feasible, regardless of whether the plan is treated as terminated under other federal law, including Title IV of ERISA. ... [¶] ... A plan under which all assets are not distributed as soon as administratively feasible is an ongoing plan and must meet the requirements of section 401(a) of the Code in order to continue its qualified status. ...

Rev. Rul. 89-87 (Emphasis added.)
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Courtesy copy of the foregoing sent via Federal Express this 8th day of November, 2005, to: Hon. Barry Ted Moskowitz United States District Court 5160 Courthouse 940 Front Street San Diego, California 92101 s/ Ed Hendricks
441611

CERTIFICATE OF SERVICE I hereby certify that on November 8th, 2005, 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: Stuart J. Reilly Law Offices of Stuart J. Reilly, P.C. Attorney for Plaintiff

s/ Ed Hendricks

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