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Township of Spring v. the Standard Insurance Co.

June 1, 2011

TOWNSHIP OF SPRING
v.
THE STANDARD INSURANCE CO.



The opinion of the court was delivered by: Surrick, J.

MEMORANDUM

Presently before the Court is Defendant Standard Insurance Co.'s Motion for Summary Judgment. (ECF No. 23.) For the following reasons, Defendant's Motion will be granted.

I. BACKGROUND

In late September and early October of 2008, the United States equity markets experienced what commentators have called "the worst stock market crash since the Great Depression," with the benchmark Standard & Poor's 500 Index falling over 50% from its peak. Paul Krugman, The Lame-Duck Economy, N.Y. Times, Nov. 21, 2008, at A35. The instant lawsuit asserts claims for breach of contract and breach of fiduciary duty in which Plaintiff Spring Township seeks to recover losses suffered in October 2008 by two of its employee-retirement plans from Defendant, who served as the investment manager for the plans.

On January 27, 2003, Plaintiff and Defendant entered into two Group Annuity Contracts (the "Contracts") pursuant to which Defendant agreed to manage the assets in two of Plaintiff's employee-retirement plans: a fund for police and a fund for non-uniformed employees (the "Plans"). (See Contracts, Def.'s Mot. Summ. J. Exs. 1, 2, ECF No. 23; Pl.'s Resp. 1, ECF No. 24.) Although the Contracts related to two different funds, the terms of the Contracts are otherwise substantially identical. Under the Contracts, Plaintiff had access to two investment options for the funds in the Plans: the Stable Asset Fund and the Separate Account. (See Contract Riders, Def.'s Mot. Summ. J. Exs. 1, 2.) The Contracts advise the Township that "[y]ou (or person(s) you nominate) are the Plan Administrator who has the authority to control and manage the operation and administration of the Plan and Plan assets. We do not assume this responsibility." (See Contracts § VIII.A.1, Def.'s Mot. Summ. J. Exs. 1, 2.) The Contracts also specify that Plaintiff can terminate the Contracts at any time by giving Defendant written notice of termination. (Id. § VII.A.I.a.) However, the Contracts require that the termination date occur no sooner than 30 days after Standard receives written notice of termination. (Id. § VII.A.I.b.)

In early 2008, the Township Board of Supervisors initiated a review of the Plans. (Daniels Dep. 24:2-25:15, Def.'s Mot. Summ. J. Ex. 15.) On August 25, 2008, the Board of Supervisors voted to move the Plans from Defendant to Nationwide Trust Company. (Bittner Dep. 43:1-11, Def.'s Mot. Summ. J. Ex. 3; Daniels Dep. 28:22-29:8.) At the same meeting, the Board of Supervisors voted to retain The Trollinger Group to advise Plaintiff on investment matters and facilitate the transfer of the Plans from Defendant to Nationwide. (Daniels Dep. 23:9-16.) Ronald Bittner of The Trollinger Group was placed in charge of assisting Plaintiff in the transfer of the Plans from Defendant to Nationwide. (Id. at 31:23-32:2.) Tracy Daniels, the Treasurer for Spring Township, was responsible for overseeing the Township's pension plans and served as the primary point of contact between the Township and Standard. (Id. at 12:18-13:16.) Daniels relied heavily on Bittner to orchestrate the transition of the Plan assets from Standard to Nationwide. (Id. at 30:2-31:22.)

On September 29, 2008, the Township sent a letter to Standard informing it of the Township's intent to terminate the Contracts and transfer the assets to J.P. Morgan Chase. (See Termination Letter 1, Def.'s Mot. Summ. J. Ex. 13.) The termination letter instructed Standard to:

1. Liquidate all assets (100%) regardless of where they are placed.

2. On October 7, 2008, send a wire transfer for the full amount of said assets to [J.P. Morgan Chase].

(Id.) On October 1st, Robin Hochstetler, the employee at Standard who was responsible for directing fund transfers, informed Tracy Daniels via email that Standard was in receipt of the Township's termination letter and requested that the Township execute and return an attached contract termination request form. (10/1 Daniels Email 1, Def.'s Mot. Summ. J. Ex. 4.) The contract termination request form stated that the expected date of transfer to a new provider can be no fewer than 30 days from the date Standard receives the forms. (Id. at 2.) This was the first time that Bittner had heard of the 30-day termination requirement, and he referred to the Contracts to confirm the requirement. (Bittner Dep. 70:17-71:4.) Daniels faxed the completed forms to Hochstetler on October 10th. The Township listed November 7th as the date for termination, in compliance with the Contracts' 30-day requirement for notice of termination. (See Daniels Fax 3, Def.'s Mot. Summ. J. Ex. 6; Bittner Dep. 71:9-14 (stating that November 7th termination date was chosen to comply with 30-day notice requirement and to avoid interfering with payment of benefits on November 1st).)

In addition, Bittner emailed Hochstetler on October 10th asking her to confirm with Daniels that Standard had received the contract termination forms, "and then make sure that the assets of both plans have been liquidated into a safe cash option in accordance with the Township's previous instructions in its first written communication dated September 29, 2008." (10/10 Bittner Email 1, Def.'s Mot. Summ. J. Ex. 7.) Bittner also noted that "[g]iven the extreme market volatility this week, these plan liquidations should have already occurred on Tuesday [October 7th], the target date directed by the Township in its termination letter." (Id.) Hochstetler emailed an investment directive form to Daniels and asked her to complete it with the Township's new investment mix. (Id.) Daniels emailed the completed investment directive form to Hochstetler the same day. (10/10 Daniels Email 1, Def.'s Mot. Summ. J. Ex. 8.) The completed forms directed Standard to allocate 100% of both Plans to the Stable Asset Fund. (Id. at 2-3.) Hochstetler processed the reallocation upon receipt of the completed forms on October 10th. (Hochstetler Dep. 72:9-16.)

Equity markets around the world declined precipitously between October 7th and October 10th. In those three days, the Township's police retirement fund lost $220,772.36 of its value, and the non-uniformed retirement fund lost $172,802.42. (Pl.'s Resp. 8.) Plaintiff alleges that Defendant's failure to process the liquidation of the Plans' assets on October 7th is the direct cause of these losses. (Id.)

II. LEGAL STANDARD

A party is entitled to summary judgment when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the [party] is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Fed. Home Loan Mortg. Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 443 (3d Cir. 2003). Where the nonmoving party bears the burden of proof at trial, the moving party may identify an absence of a genuine issue of material fact by showing the court that there is no evidence in the record supporting the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 325 (1986); UPMC Health Sys. v. Metro. Life Ins. Co., 391 F.3d 497, 502 (3d Cir. 2004). If the moving party carries this initial burden, the nonmoving party must set forth specific facts showing that there is a genuine issue for trial. See Fed. R. Civ. P. 56(e)(2) (stating that "an opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must . . . set out specific facts showing a genuine issue for trial"); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (noting that the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts"). The nonmoving party may not avoid summary judgment by relying on speculation or by rehashing the allegations in the pleadings. Ridgewood Bd. of Educ. v. N.E. for M.E., 172 F.3d 238, 252 (3d Cir. 1999). "Where the record taken as a whole could not lead a reasonable trier of fact to find for the non-moving party, there is no 'genuine issue ...


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