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RICHARD B. ROUSH, INC. v. NEW ENGLAND MUT. LIFE
October 16, 2001
RICHARD B. ROUSH, INC. PROFIT SHARING PLAN, BY RICHARD K. ROUSH, TRUSTEE, ROUSH INSURANCE GROUP, INC., AS SUCCESSOR TO RICHARD B. ROUSH, AND RICHARD B. ROUSH, AND RICHARD K. ROUSH, PLAINTIFFS
THE NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY AND NEW ENGLAND FINANCIAL, DEFENDANTS.
The opinion of the court was delivered by: McCLURE, District Judge.
Plaintiffs initiated this Employee Retirement Income Security
Act ("ERISA")*fn1 action against defendants with the filing
of a complaint pursuant to ERISA § 502(e)(1),
29 U.S.C. § 1132(e)(1) and 28 U.S.C. § 1331.
In their complaint, plaintiffs allege both state law and ERISA
claims with respect to defendants' purported mismanagement of
assets under an employee pension benefit plan. Defendants filed
a motion to dismiss plaintiffs' state law claims based on ERISA
preemption. In response, plaintiffs filed an amended complaint,
including only two counts, one asserting a breach of fiduciary
duty under ERISA (Count I) and the other alleging a violation of
ERISA's prohibited transaction rules (Count II). The court
subsequently denied as moot defendants' motion to dismiss.
Plaintiffs have now moved for partial summary judgment as to
liability on Counts I and II, and defendants have moved for
For the reasons that follow, plaintiffs motion will be denied
and defendants' motion will be granted.
Summary judgment is appropriate if the "pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue 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)
. . . [T]he plain language of Rule 56(c) mandates the
entry of summary judgment, after adequate time for
discovery and upon motion, against a party who fails
to make a showing sufficient to establish the
existence of an element essential to that party's
case, and on which that party will bear the burden of
proof at trial. In such a situation, there can be `no
genuine issue as to any material fact,' since a
complete failure of proof concerning an essential
element of the nonmoving party's case necessarily
renders all other facts immaterial. The moving party
is `entitled to judgment as a matter of law' because
the nonmoving party has failed to make a sufficient
showing on an essential element of her case with
respect to which she has the burden of proof.
Celotex Corp. v. Catrett, 477 U.S. 317, 323324, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986).
The moving party bears the initial responsibility of stating
the basis for its motions and identifying those portions of the
record which demonstrate the absence of a genuine issue of
material fact. Id. at 323, 106 S.Ct. 2548. He or she can
discharge that burden by "showing . . . that there is an absence
of evidence to support the nonmoving party's case." Id. at
325, 106 S.Ct. 2548.
Issues of fact are genuine "only if a reasonable jury,
considering the evidence presented, could find for the
non-moving party." Childers v. Joseph, 842 F.2d 689, 693-694
(3d Cir. 1988) (citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Material
facts are those which will affect the outcome of the trial under
governing law. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The
court may not weigh the evidence or make credibility
determinations. Boyle v. County of Allegheny, 139 F.3d 386,
393 (3d Cir. 1998). In determining whether an issue of material
fact exists, the court must consider all evidence and inferences
drawn therefrom in the light most favorable to the non-moving
party. Id.; White v. Westinghouse Elec. Co., 862 F.2d 56, 59
(3d Cir. 1988).
If the moving party satisfies its burden of establishing a
prima facie case for summary judgment, the opposing party must
do more than raise some metaphysical doubt as to material facts,
but must show sufficient evidence to support a jury verdict in
its favor. Boyle 139 F.3d at 393 (quoting, inter alia,
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).
The following claims are those applicable to the instant
motion, and the facts relating thereto are essentially
Plaintiffs are an ERISA-regulated profit sharing plan, Richard
B. Roush, Inc. Profit Sharing Plan ("the Plan"); the two Plan
trustees, Richard B. Roush and his son, Richard K. Roush; and
the Plan sponsor, Roush Insurance Group, Inc. (successor by
merger with Richard B. Roush, Inc.). Roush Insurance Group, Inc.
and Richard B Roush, Inc. will be referred to collectively as
"RBR Inc." Defendants are The New England Mutual Life Insurance
Company and its successor New England Financial, referred to
collectively as "New England."
In 1973, RBR Inc. established the Plan which was registered
under section 401(a) of the Internal Revenue Code for the
purpose of providing retirement benefits for the employees of
In 1994, plaintiffs were approached by an insurance agent
named Robert H. Todd ("Todd") about possibly transferring its
profit-sharing plan invested with Massachusetts Financial
Services ("MFS") to New England.*fn3 In reliance on
representations by Todd and another New England representative
named Joseph M. Malis ("Malis"), plaintiffs decided to transfer
the Plan to New England. Thereafter, on December 6, 1994,
Richard K. Roush ("Roush"), on behalf of RBR Inc., executed the
New England Age Based Contribution Plus Profit Sharing Plan
Adoption Agreement ("Adoption Agreement"). The Adoption
Agreement was designed by New England, and constituted an
amendment and restatement of RBR Inc.'s existing profit-sharing
plan, whereby RBR Inc. adopted, in place of its former
profit-sharing plan, the New England's Age Based Contribution
Plus Profit Sharing Plan. The Adoption Agreement incorporated by
reference The New England Age Based Contribution Profit Sharing
Plan Basic Plan Document ("Basic Plan Document").
On March 14, 1995, plaintiffs completed an application for a
group policy called the "Performer" ("the Policy") issued by New
England under which the Plan's funds could be invested. The
Policy was accepted by New England and given an effective date
of March 29, 1995. The Basic Plan Document contemplates
individual retirement accounts for the individual participants
in the Plan which could be invested in various funds. The
Policy, in turn, provides several different investment funds
into which the Plan's trustees could direct the investment of
the Plan funds — presumably based on investment elections
communicated by the Plan participants to the trustees.
The Policy provided that New England would "establish and
maintain . . . a Deposit Fund to receive deposits of Plan
contributions," and which would be "assigned to and made part of
the assets" of New England's General Investment Account. The
Policy also provided that the Deposit Fund would "be credited
with deposits and interest . . . as provided under this Policy."
The Policy further stated: "Upon receipt of sufficient
investment direction, the Deposit Fund and each Separate
Investment Fund to which a portion of the deposit is directed by
the Policyholder will be so credited as of its earliest possible
Business Day or Valuation Date, as the case may be."
During the period between May 24, 1995 and September 30, 1995,
Roush made numerous requests to New England for a complete
accounting of the funds transferred to New England, and
verification of proper allocation of the Plan assets into the
various investment funds as directed by the Selection Forms.
On September 30, 1995, New England provided plaintiffs with
statements of the Plan's funds. However, the information
provided did not indicate the specific amounts transferred by
New England into each investment fund for each Plan participant,
nor did the information reflect the proper accrual of interest
and earnings for each participant in each investment fund. After
reviewing the information provided by New England, Roush made
several telephone calls and sent letters to New England to
inform them that the Plan participants' account balances were
incorrect, that New England had failed to properly allocate the
Plan assets as specified by each participant on the Selection
Forms, and to demand that adjustments be made to reflect proper
accrual of interest and earnings on each participant's account.
On or about November 7, 1995, New England sent the same
information dated September 30, 1995 to Roush. After receiving
the uncorrected statement, Roush again made numerous telephone
calls and sent letters to New England demanding a proper
accounting and adjustments to the Plan participants' accounts to
reflect the interest and earnings which should have accrued
since May 24, 1995.
On December 12, 1995, Stephen Chiumenti ("Chiumenti"), inhouse
counsel for New England wrote plaintiffs and acknowledged
plaintiffs' complaint about untimely investment allocations.
Further, Chiumenti informed plaintiffs that upon confirmation
that the investment elections had not changed, the Plan funds
would be invested in accordance with those elections immediately
and "without prejudice to your rights regarding the intervening
delay." On or about December 12, 1995, New England transferred
Plan assets in the approximate amount of $953,223.03 into the
separate investment fund accounts designated by the Plan
participants on their Selection Forms.
When New England transferred the Plan assets into the separate
investment fund accounts, New England failed to make an
adjustment to compensate the participants for the interest and
earnings which would have been earned during the period from May
24, 1995 through December 12, 1995, if the Plan assets had been
timely allocated to the proper investment funds.
After learning that the Plan assets had been allocated by New
England, Roush demanded, on behalf of the Plan, a proper
accounting to verify the accuracy of the amounts transferred to
each investment fund for each participant, and proper
adjustments for the lost interest and earnings. In spite of
numerous demands, New England failed to provide to plaintiffs'
satisfaction an accounting of the Plan assets or to credit the
Plan participants' accounts for the lost interest and earnings.
As a result, Roush, on behalf of the Plan and RBR Inc., sent
written demands to New England for the transfer of all Plan
assets, including an adjustment for the lost interest and
earnings, to a new investment firm to be chosen by RBR Inc.
On August 2, 1996, New England also notified plaintiffs that
they were in default for not having paid an administrative fee
to New England in the amount of $2,593, that payment of the
administrative fee was required in order to "return the account
to good standing" and that New England would take no further
action, including record keeping services for the Plan
participants or the preparation and/or filing of documents
required by the IRS and U.S. Department of Labor, until the
administrative fee was paid.
Plaintiffs refused to pay the administrative fee to New
England unless or until New England made adjustments for its
allegedly untimely and improper allocation of the Plan assets
and demonstrated in an accounting that such adjustments had been
On August 2, 1996, Roush again demanded that the Plan assets
be transferred in full, including a credit for the lost interest
and earnings, without any reduction for surrender charges or
penalties. New England again refused to transfer the assets to
Princor Financial Services, as demanded. Between August 2, 1996
and November of 1998, Roush attempted to resolve this dispute
through correspondence and telephone calls to New England with
On several occasions, Plan participants contacted New England
to request that monies be transferred between various investment
funds or that monies be released because one of the Plan
participants, Richard B. Roush, had reached retirement age. New
England refused to honor the Plan participants' requests unless
the Plan participants provided the specific dollar amounts to be
transferred. It was, however, not possible for Plan participants
to specify the dollar amounts for the transfers or release of
monies because New England did not provide participants with a
detailed accounting that correctly reflected the amount held by
each participant or provide any updated information regarding
earnings on the participants' monies in each investment fund.
Roush hired Keystone Retirement Corporation ("Keystone") to
determine the amount of lost interest and earnings as a result
of New England's conduct and to calculate the amount that should
have been held by each Plan participant in each investment fund
had New England timely and properly allocated the Plan's assets.
In June of 1998, plaintiffs and Keystone provided to New
England detailed information demonstrating the alleged errors in
the allocation of the Plan's assets and the interest and
earnings that should have accrued had the Plan's assets been
properly and timely allocated. According to Keystone, as of
June, 1998, New England's errors ...