United States District Court, Eastern District of Pennsylvania
JEFFREY E. PERELMAN
RAYMOND G. PERELMAN, JASON GUZEK, and GENERAL REFRACTORIES COMPANY
Presently before the Court is a Motion by Defendants General Refractories Company (“GRC”), Raymond Perelman (“Raymond”), Jason Guzek (“Guzek”), and Reliance Trust Company (“Reliance”) for summary judgment on the remaining claims brought by Plaintiff Jeffrey Perelman (“Jeffrey”). (Docket No. 140). The Court heard oral argument on those motions on December 11, 2013. Thereafter, Jeffrey filed a Motion for Leave to Supplement his Second Amended Complaint. (Docket No. 156.) For the following reasons, we deny Jeffrey’s Motion to Supplement, and grant summary judgment to Defendants on all of Jeffrey’s remaining claims for equitable relief.
I. PROCEDURAL HISTORY AND JEFFREY’S MOTION FOR LEAVE
In his Second Amended Complaint (“SAC”), Jeffrey, a participant in the General Refractories Company Pension Plan for Salaried Employees (“the Plan”), sought various forms of monetary and equitable relief from Raymond, Guzek, GRC, and Ronald Perelman (“Ronald”), including disgorgement of improper profits and the restoration thereof to the Plan; the removal of Raymond and Guzek as fiduciaries of the Plan, and an order enjoining them from serving in a fiduciary capacity with regard to any employee benefit plan subject to ERISA for the rest of their lives; the appointment of an independent trustee; an order directing the independent trustee to hire an independent auditor to conduct an audit of the Plan for the Plan Years 2002-2010; and an order declaring the indemnification provisions of the Plan document and trust agreement null and void as against public policy. Perelman v. Perelman, Civ. A. No. 10-5622, 2012 WL 3704783, at *3 (E.D. Pa. Aug. 28, 2012) (“the SAC Opinion”). In the SAC Opinion, we held that Jeffrey lacked standing in his capacity as a Plan participant to bring claims for monetary forms of equitable relief under ERISA section 502(a)(3), 29 U.S.C. § 1132(a)(3), because he had not plausibly alleged actual harm, namely that the Plan would suffer a diminution in the value of Plan assets, diminution in the benefits he would receive from the Plan, or any risk that the Plan would default on its future obligations to participants, as a result of the Plan’s allegedly improper investments. Id., at *6 (“While an action for disgorgement of improper profits is an equitable remedy . . . under the holding in Cigna Corp. [v. Amara, __ U.S. __, 131 S. Ct. 1866, 1878 (2011)], to seek such relief actual harm must be demonstrated. [B]ecause he has failed to allege any actual injury, we dismiss his claims seeking restoration of losses and disgorgement of profits as part of an equitable remedy.”) (internal citations and footnote omitted).
Thereafter, GRC filed a Motion for Judgment on the Pleadings (Docket No. 106), Raymond and Guzek jointly filed a similar Motion (Docket No. 107), and Jeffrey filed a Motion for Leave to File a Third Amended Complaint (“the TAC”) (Docket No. 109). In his Motion for Leave to file the TAC, Jeffrey sought to rejoin Ronald (who has been dismissed as a defendant in the SAC Opinion) and, for the first time, add additional claims seeking monetary relief against all parties pursuant to ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2). We held that Jeffrey, in his capacity as a plan participant, did not have standing under ERISA section 502(a)(2) to seek monetary relief in the forms of disgorgement and restitution, and dismissed in their entirety the claims against Ronald which sought only money damages. Perelman v. Perelman, 919 F. Supp. 2d 512, 520 (E.D. Pa. 2013) (the “TAC Opinion”). We found that the claims seeking equitable relief in the form of the removal of Raymond and Guzek, as trustee and administrator respectively of the Plan, and the appointment of an independent trustee were moot because Raymond and Guzek had already resigned, and Reliance had been appointed as the Plan’s new trustee. Id.at 522. We held that Jeffrey’s claim seeking a declaration that the Plan’s indemnification clause is void failed to state a claim upon which relief could be granted because that document’s clause fell within the safe harbor provided by 29 C.F.R. § 2509.75-4. Id. at 523. However, we found that the Plan’s Trust Agreement in effect during the time period at issue in the Second Amended Complaint did not fall within the safe harbor, and permitted that claim to continue. Id. at 523-24. Jeffrey’s claim for injunctive relief seeking to bar Raymond and Guzek from serving in the future as ERISA fiduciaries was subject to dismissal on prudential standing grounds because Jeffrey did not show that he was asserting his own legal interests. Id. at 525. Finally, we found that Jeffrey had no standing to seek an extensive audit of the Plan’s past financial condition; rather, his right to injunctive relief as a plan participant was limited to an audit to determine the Plan’s current ability to meet its financial obligations. Id. at 526. Accordingly, we denied Jeffrey leave to file the TAC, but permitted him to add Reliance as a party defendant, since Reliance would be the party against which audit relief would be directed if that claim were successful. Id. at 527. Jeffrey did not seek reconsideration of any determination contained in the TAC Opinion.
In his current Motion, Jeffrey again seeks to supplement the SAC to add a claim for “surcharge,” a monetary form of injunction relief, under ERISA section 502(a)(3). This claim for money damages under section 502(a)(3) is materially identical to the claim we dismissed in the SAC Opinion. Jeffrey argues that the record developed in discovery raises genuine issues of material fact, namely, whether the Defendants’ actions caused losses to the Plan and whether the Plan is adequately funded. We deny the request to supplement the SAC.
Although Jeffrey’s Motion is labeled as one to “supplement” the SAC, the relief its seeks - that he be permitted to assert a claim for an equitable form of money damages under section 502(a)(3) - has already been fully adjudicated in the SAC Opinion. Thus, the Motion must be deemed a motion under Fed. R. Civ. P. 60 for relief from our prior Order. Rule 60(b) sets forth six grounds for relief, and seeks “to strike a proper balance between the conflicting principles that litigation must be brought to an end and that justice must be done.” Boughner v. Sec’y of Health, Educ. & Welfare, 572 F.2d 976, 977 (3d Cir. 1978) (citation omitted). In addition to specific grounds for relief, the Rule provides a catchall of “any other reason that justifies relief.” Fed. R. Civ. P. 60(b)(6). A party seeking relief under Rule 60(b)(6) “must demonstrate the existence of extraordinary circumstances that justify reopening the judgment.” Budget Blinds, Inc. v. White, 536 F.3d 244, 255 (3d Cir. 2008) (footnote and citations omitted); Jackson v. Danberg, 656 F.3d 157, 165-66 (3d Cir. 2011) (relief under Rule 60(b)(6) is “available where the party seeking relief demonstrates that ‘extreme’ and ‘unexpected’ hardship will result absent such relief.”) (quoting United States v. Swift & Co., 286 U.S. 106, 119 (1932)).
Jeffrey has identified no “extraordinary circumstances,” which would cause “extreme and unexpected” hardship, and would thus warrant relief from the holdings we made in the SAC Opinion and TAC Opinion. Jackson, 656 F.3d at 165-66 (quotation omitted). In his proposed supplement, filed after the oral argument, Jeffrey again asserts that he “brings this action in his capacity as a participant and on behalf of [the Plan]” (See Proposed Supplemented Second Amended Compl. (“PSSAC”) at ¶ 1.) He includes only one additional factual allegation, that “[a]s a result of Defendants’ breaches of fiduciary duty, the Plan suffered a diminution in the value of its assets of at least $875,000,” and is thus underfunded. (PSSAC ¶¶ 231, 243, 251, 289, 316.) Based on this allegation, he seeks to amend his prayer for relief to again include a request for monetary form of equitable relief, namely “imposing a surcharge on the Defendants requiring them to make the Plan whole for the diminution in the value of Plan assets caused by their breaches of fiduciary duties.” (PSSAC at 52.) Notably, Jeffrey again does not allege that he, as a Plan participant, has suffered any actual harm as a result of the Defendants’ allegedly improper investments of Plan assets, such as a diminution in the benefits he would receive from the Plan, or that there is any risk that the Plan will default on its future obligations to participants.
The failure to allege individual loss renders implausible any assertion under Rule 60(b)(6) of extraordinary circumstances that would cause extreme and unexpected hardship, just as it again renders implausible the underlying claim for monetary forms of injunctive relief under section 502(a)(3) that the PSSAC seeks to add. We have discussed extensively, in regard to both the section 502(a)(2) claim and the section 502(a)(3) claim, that Jeffrey’s failure to allege individual harm resulting from the Defendants’ alleged actions leads to the inexorable conclusion that he has no Article III standing to raise such claims. SAC Opinion, 2012 WL 3704783, at *6; TAC Opinion, 919 F. Supp. 2d at 519-520. Those claims, we stated, can only be raised, if at all, by the Plan itself, or by the Plan sponsor. TAC Opinion at 520. Even assuming that the value of Plan assets was diminished as a result of Defendants’ alleged actions, and that the Plan was not made whole as a result of Raymond’s voluntary payment (detailed below), Jeffrey still has not alleged that the ERISA benefits that he or any other Plan participant will receive has been negatively impacted.
The decisions upon which Jeffrey relies in seeking leave do not support his assertion of individual injury because they are clearly distinguishable on their facts. In Edmonson v. Lincoln Nat. Life Ins. Co., 725 F.3d 406, 416 (3d Cir. 2013), the Third Circuit reiterated its decision in Horvath v. Keystone Health Plan E., Inc., 333 F.3d 450 (3d Cir. 2003), that section 502(a)(3) requires a plaintiff to show individual financial loss in order to have standing to pursue monetary relief. Id. (stating “we believe Horvath holds that a plaintiff must show she has an individual right to the defendant’s profit and that when a plan has the right to the profit, the individual plaintiff has not suffered a constitutional injury.”) Edmonson was the beneficiary of a life insurance policy; rather than sending her full payment of the policy proceeds, Lincoln placed the proceeds in a checking account paying minimal interest, which Edmonson could draw upon as she wished, while it invested the retained assets for its own profit. Id. at 411-12. Notwithstanding evidence that Lincoln advised Edmonson that she could withdraw the entire amount immediately, the Third Circuit held that she had demonstrated a genuine issue of material fact on the question of whether she suffered an individual injury because she had adduced evidence that the profit Lincoln earned from investing the retained assets was greater than the amount of interest it paid to her, thereby breaching its fiduciary duty. Id. at 417 (holding that “Edmonson incurred an injury-in-fact because she ‘suffered an individual loss, measured as the “spread” or difference’ between the profit Lincoln earned by investing the retained assets and the interest it paid to her.”). The Court emphasized that an injury-in-fact sufficient to confer standing requires that the individual plaintiff have a “right to the profit.” Id. at 418.
Jeffrey has made no such allegation here. He does not assert an individual right to share in the alleged loss that the Plan suffered. This failure amply demonstrates the absence of any extreme and unexpected hardship to Jeffrey arising from our prior decisions and the implausibility of the alleged supplement. Accordingly, his Motion for Leave to Supplement is denied.
II. DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
Defendants move for summary judgment on Jeffrey’s two remaining claims for equitable relief and have filed a Statement of Undisputed Facts. (See Docket No. 141.) Jeffrey has filed a Response to Defendants’ Statement. (See Docket No. 147.) The following facts are undisputed on the summary judgment record:
1. The Plan is a defined benefit pension plan. (Def. Ex. B at 1.)
2. In March 2012, Raymond submitted an application to the Department of Labor for relief under its Voluntary Fiduciary Correction Program (“VFCP”). (Def. Ex. C.)
3. As part of the VFCP application, Raymond contributed $270,446.42 to the Plan’s trust (“VFCP Payment”). (Id.)
4. In December 2012, the Department of Labor rejected Raymond’s VFCP application because the transactions identified in that application did not meet the requirements of the VFCP. The Department of Labor took “no position on whether the transactions” were prohibited by ERISA. (Def. Ex. D.)
5. In September 2012, the Plan appointed a directed trustee, Reliance Trust Company, to hold the Plan’s assets; an investment manager, InR Advisory Services, LLC (“InR”), to select the assets held by the directed trustee; and a custodian, and TD Ameritrade, to act as the Plan’s broker/dealer and pay benefits to the Plan’s participants and beneficiaries. (Def. Ex. G.)
6. On September 18, 2012, Raymond resigned as the Plan’s trustee and GRC appointed Reliance to serve as the Plan’s directed trustee. (Def. Ex. E.)
7. As part of this appointment, GRC and Reliance entered into a written agreement entitled “the Trust Agreement.” (Def. Ex. F.)
8. Under the Trust Agreement, Reliance holds legal title to all of the Plan’s assets. (Def. Ex. F, Arts. 1.8, III, V.)
9. The Trust Agreement also provides that the Plan may appoint investment managers. (Id., Art. 4.2.)
10. With respect to assets that have been delegated to an investment manager, “the Trustee shall follow and carry out the instruction of the appointed Investment Manager with respect to the acquisition, disposition and reinvestment of assets[.]” (Id., Art. 4.2(c).)
11. The Trust Agreement also provides that Reliance is “subject to the direction of the Company, the Administrator and the Investment Committee, and, to the extent applicable under the terms of this Agreement, the directions of Investment Managers” in the ...