Free Response - District Court of Arizona - Arizona

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Ed Hendricks (Arizona Bar No. 002359) Michael K. Dana (Arizona Bar No. 019047) 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. CASE NO.: CIV 02 2218 PHX EHC BREWER DEFENDANTS' RESPONSE TO PLAINTIFF'S SUPPLEMENTAL AUTHORITY RE: PLAINTIFF'S RESPONSE IN OPPOSITION TO DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT ON COUNT ONE

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") submit the following Response To Plaintiff's Supplemental Authority Re: Plaintiff's Response In Opposition To Defendants' Motion For Partial Summary Judgment On Count One. /// ///

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A.

The Court Should Not Permit Plaintiff To Supplement His Response In Opposition With Authority That Could Have, And Should Have, Been Cited When Plaintiff's Response In Opposition Was Filed. Plaintiff Stuart Reilly seeks to supplement the authority filed by him in Plaintiff's

Response in Opposition to Defendants' Motion for Partial Summary Judgment on Count One. Contrary to Plaintiff's representation to the Court and counsel,1 the supplemental authority that Plaintiff requests the Court to consider is not new authority that has come into existence since the filing of Plaintiff's Response in Opposition to Defendants' Motion for Partial Summary Judgment on Count One, but rather, a 1985 case, Hickerson v. Veliscol Chemical Corp., 778 F.2d 365 (7th Cir. 1985), and a section of the statute, itself ­ ERISA § 4041(e), 29 U.S.C. § 1341(e). This authority was therefore in existence when Plaintiff filed his Response in

Opposition to Defendants' Motion for Partial Summary Judgment on Count One on April 7, 2005, nearly two full months after the Motion was filed by the Brewer Defendants. As such, it could have, and should have, been cited by Plaintiff at that time. Accordingly, the Brewer Defendants request that the Court strike Plaintiff's Supplemental Authority Re: Plaintiff's Response in Opposition to Defendants' Motion for Partial Summary Judgment on Count One. B. The Supplemental Authority Cited By Plaintiff Is Inapposite. Plaintiff argues that "[a]s a matter of law, a merger or conversion of a defined benefit plan to a defined contribution plan causes the defined benefit plan to terminate." (Plaintiff's Supplemental Authority, p. 1, lns. 23-24.) In support of this proposition, Plaintiff cites dicta in Hickerson v. Velsicol Chemical Corp., 778 F.2d 365 (7th Cir. 1985) and ERISA § 4041(e), 29 U.S.C. § 1341(e). Neither Hickerson nor ERISA §4041(e) are relevant to, let alone controlling in, this action. Indeed, the Charles M. Brewer, Ltd. Restated Pension Plan is not subject to

When Plaintiff raised the issue of supplementing his Response in Opposition to the Summary Judgment at the conference call with the Court and counsel in August, Defendants' counsel understood him to be requesting leave to supplement with newly published authority.

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Title IV of ERISA. ERISA §§ 4001, et seq., 29 U.S.C. §§ 1301. Therefore, ERISA § 4041(e) ­ the predicate for Plaintiff's argument ­ is not applicable to the Charles M. Brewer, Ltd. Restated Pension Plan, and it does not form a proper legal basis upon which to conclude that the Plan was terminated as a matter of law in 1995. Hickerson did not involve the conversion of a defined benefit plan into a defined contribution plan. It involved the "conversion by amendment of defendant Velsicol

Chemical Corporation's defined-contribution deferred profit-sharing plan ... into a definedbenefit pension plan...." Id. at 367. Thus, Hickerson is not directly relevant to this case, and any statement it contains with regard to the conversion of a defined benefit plan into a defined contribution plan is at best dicta. The danger of applying dicta from Hickerson to this case becomes readily apparent when the Court considers that Hickerson's statements regarding defined benefit pension plans were overly board and failed to take into account defined benefit plans, such as the Charles M. Brewer, Ltd. Restated Pension Plan, which are exempted from Title IV. In Hickerson, the Court held that the conversion of the defined contribution plan into a defined benefit plan was not a termination of the defined contribution plan, noting that "ERISA contemplates plan amendments and such transactions as plan mergers, consolidations and transfers of assets." Id., at 375. It then gratuitously added, "In the context of all these, it does specifically state that a conversion from a defined-benefit to a defined-contribution plan causes a plan termination, ERISA §4041(f), 29 U.S.C. § 1341(f);2 . . . But there is no suggestion that the reverse action ­ conversion from defined-contribution to defined-benefit ­ should be treated any differently than other plan amendments." Id. The Court also noted that one of the primary reasons for "ERISA to show greater concern when a defined benefit is

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ERISA § 4041(f), 29 U.S.C. § 1341(f), cited by the Hickerson Court is now ERISA § 4041(e), 29 U.S.C. § 1341(e).

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converted" is that "the assets in a defined-benefit pension trust are federally-insured by the Pension Benefit Guaranty Corporation." Id. at 375 n.15. Plaintiff has latched on to that statement in Hickerson and its citation to ERISA §4041(e) to argue that the Charles M. Brewer, Ltd. Restated Pension Plan, a defined benefit pension plan, was terminated as a matter of law in 1995. Plaintiff is simply wrong. ERISA § 4041(e), 29 U.S.C. § 1341(e),3 is part of Title IV of ERISA ­ Plan Termination Insurance. Section 4041(e), like all the provisions of Title IV, applies only to

defined benefit plans governed by Title IV of ERISA (i.e., plans that are insured by the Pension Benefits Guaranty Corporation). ERISA § 4021(a), 29 U.S.C. § 1321(a). ERISA § 4021(b), 29 U.S.C. § 1321(b), contains a large number of exceptions to the plans covered by Title IV of ERISA. As applicable here, it states: This section does not apply to any plan ­ (13) established and maintained by a professional service employer which does not at any time after the date of enactment of this Act have more than 25 active participants in the plan. ERISA § 4021(b)(13), 29 U.S.C. § 1321(b)(13).4 (Emphasis added.) Although the Charles M. Brewer, Ltd. Restated Pension Plan is a defined benefit pension plan, it is, and always has been, a small plan of less than 25 active participants that is subject to the exemption created by ERISA § 4021(b)(13). Its assets are not, and never have been, federally-insured by the Pension Benefit Guaranty Corporation ("PBGC"). Therefore,

ERISA § 4041 (e) states: "The adoption of an amendment to a plan which causes the plan to become a plan described in section 4021(b)(1) [i.e., a defined contribution plan] constitutes a termination of the plan. Such an amendment may take effect only after the plan satisfies the requirements for standard termination under subsection (b) or distress termination under subsection (c)." A "professional service employer" for the purpose of this section is defined to mean "any proprietorship, partnership, corporation, or other association or organization (i) owned or controlled by professional individuals or be executors or administrators of professional individuals, (ii) the principal business of which is the performance of professional services." ERISA § 4021(c)(2)(A), 29 U.S.C. § 1321(c)(2)(A). "Professional individuals" include attorneys at law. ERISA § 4021(c)(2)(B), 29 U.S.C. § 1321(c)(2)(B).
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not only is the Charles M. Brewer, Ltd. Restated Pension Plan not subject to ERISA § 4041(e), but the primary reason for Section 4041(e) is not applicable to this Plan since its assets are not insured by the PBGC. While this disposes of Plaintiff's argument that the proposed supplemental authority establishes as a matter of law that the Charles M. Brewer, Ltd. Restated Pension Plan was terminated in 1995, the Brewer Defendants also point out to the Court that ERISA § 4041(e), by its plain language, requires the "adoption of an amendment to a plan which causes the plan to become a [defined contribution] plan ...." ERISA § 4041(e). There is no evidence here that the sponsor of the Charles M. Brewer, Ltd. Restated Pension Plan ever adopted such an amendment. Indeed, the evidence is completely to the contrary. Hickerson also makes clear that general lay notions of termination and amendment do not suffice to establish an amendment of a defined benefit plan converting it into a defined contribution plan (or vice versa) and terminating the original plan. 778 F.2d at 375. The Court rejected plaintiff's contention that the plan terminated because it "stopped functioning" and arguably was converted into an entirely different type of retirement plan. Rather, the Court looked to the specific provisions of the plan and determined that none of the events described therein with regard to termination had occurred. Thus, neither Hickerson nor ERISA § 4041(e) is applicable to this action. Neither establishes that the Charles M. Brewer, Ltd. Restated Pension Plan was terminated as a matter of law in 1995. Plaintiff's argument to the contrary is without merit. DATED this _____ day of September, 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

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-andREISH 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

Courtesy copy of the foregoing sent via Federal Express this 26th day of September, 2005, to: Hon. Barry Ted Moskowitz United States District Court 5160 Courthouse 940 Front Street San Diego, California 92101 s/Michael K. Dana

CERTIFICATE OF SERVICE I hereby certify that on September 26th, 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. Attorneys for Plaintiff

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438458

I hereby certify that on ________________, I served the attached document by (insert service method: mail, courier service, in-person delivery, e-mail) on the following, who are not registered participants of the CM/ECF System:

s/ Michael K. Dana

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