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Perelman v. Perelman

United States Court of Appeals, Third Circuit

July 13, 2015

JEFFREY E. PERELMAN, AS A PARTICIPANT IN THE GENERAL REFRACTORIES COMPANY PENSION PLAN FOR SALARIED EMPLOYEES
v.
RAYMOND G. PERELMAN; RONALD O. PERELMAN; JASON GUZEK; GENERAL REFRACTORIES COMPANY; RELIANCE TRUST COMPANY, Jeffrey E. Perelman, as a participant in the General Refractories Company Pension Plan for Salaried Employees, a/k/a the Grefco Minerals, Inc. Pension Plan for Salaried Employees (the Pension Plan), Appellant

Submitted Under Third Circuit L.A.R. 34.1(a) April 17, 2015.

On Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Civil No. 2-10-cv-05622). District Judge: Honorable John R. Padova.

Paul A. Friedman, Esq., Epstein, Becker & Green, New York, NY; Jonathan S. Goldman, Esq., James T. Smith, Esq., Rebecca D. Ward, Esq., Philadelphia, PA, Counsel for Appellant.

Ethan M. Dennis, Esq., Philadelphia, PA; Clifford E. Haines, Esq., Haines & Associates, Philadelphia, PA; Marjorie M. Obod, Esq., Dilworth Paxson, Philadelphia, PA, Counsel for Appellee Raymond G. Perelman.

Michael S. Doluisio, Esq., William T. McEnroe, Esq., Ryan M. Moore, Esq., Dechert, Philadelphia, PA; Andrew J. Levander, Esq., Dechert, New York, NY, Counsel for Appellee Ronald O. Perelman.

Derek J. Cusack, Esq., Dicalite Management Group, Inc., Bala Cynwyd, PA, Counsel for Appellee General Refractories Company.

Before: AMBRO, VANASKIE, and SHWARTZ, Circuit Judges.

OPINION

VANASKIE, Circuit Judge.

This matter arises under § 502(a)(3) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(3), which authorizes suits by, inter alia, a pension plan beneficiary to enjoin any act or practice that violates ERISA, " to obtain other appropriate equitable relief . . . to redress such violations," or to enforce any provision of ERISA or the terms of a pension plan. Id. Appellant Jeffrey Perelman is a participant in the defined employee pension benefit plan (the Plan) of Appellee General Refractories Company (GRC). Jeffrey alleges that his father, Raymond Perelman, as trustee of the Plan, breached his fiduciary duties by covertly investing Plan assets in the corporate bonds of struggling companies owned and controlled by Jeffrey's brother, Appellee Ronald Perelman. Jeffrey contends that these transactions were not properly reported; depleted Plan assets; and increased the risk of default, such that his own defined benefits are in jeopardy. The District Court dismissed several of Jeffrey's claims for lack of constitutional standing, later granted summary judgment against him on all remaining claims, and denied his application for attorneys' fees and costs under ERISA § 502(g)(1), 29 U.S.C. § 1132(g)(1). We will affirm.

I.

In 1982, Raymond became the Chairman of GRC, a large manufacturer of industrial materials.[1] Between 2003 and 2009, Raymond was a trustee of the GRC Plan, and he served as Plan Administrator between 2003 and 2005. In that position he exercised discretionary control over management of Plan assets and thus qualified as both a plan fiduciary and a " party in interest" under ERISA. See 29 U.S.C. § 1002(21)(A), (14)(A). Jason Guzek, a defendant in this action but not an appellee, assumed the role of Plan Administrator from 2006 to 2008 and was succeeded by GRC itself as Plan Administrator in 2009.

Raymond's son Ronald has been the controlling shareholder of Revlon, Inc., and its wholly owned subsidiary, Revlon Consumer Products Corporation (together, Revlon). Beginning in 2002, Raymond directed the Plan's purchase of roughly $2 million of high-risk Revlon corporate bonds. In 2004, Raymond converted those bonds into Revlon stock. He and his wife Ruth then assigned beneficial ownership of the Revlon shares to Mafco Holdings, Inc., another company owned and controlled by Ronald. As Plan trustee, Raymond also invested Plan assets in a lending agreement between Revlon and MacAndrews & Forbes Holdings, Inc. (MacAndrews), an entity that, like Revlon, was principally owned by Ronald. One consequence of these transactions was that Ronald, by virtue of his control over the voting rights of stock held by the Plan, became a Plan fiduciary under § 1002(21)(A). Ronald also qualified as a " party in interest," both because of that fiduciary status and as a relative of Raymond. Id. § 1002(14)(A), (F).

Since 1985, Jeffrey has been a participant in GRC's defined benefit pension plan. Jeffrey alleges that Raymond and Ronald, at the Plan's expense, structured transactions to allow Ronald to raise capital for Revlon without sacrificing his control over the company. Jeffrey contends that these investments, which diminished Plan assets, were routinely misreported by the defendants on the annual reports that a plan administrator must file with the Internal Revenue Service (IRS) and Department of Labor. See id. § § 1023-24. Between 2003 and 2005, the reports did not disclose that the Plan held investments in Revlon bonds. Instead, the 2003 and 2004 reports stated that all Plan assets were invested in master trust accounts, while the reports from 2005 through 2009 stated that all Plan assets were invested in mutual funds. Assessments from independent auditors, which were appended to the annual reports between 2003 and 2008, did disclose the investments in Revlon bonds, but either failed to identify those investments as party-in-interest transactions or did so for the wrong reasons. The Plan's investment in the lending agreement between Revlon and MacAndrews also was described inaccurately.

In October 2010, Jeffrey brought this lawsuit both as an individual and on behalf of the Plan against Raymond, Ronald, Guzek, and GRC. The Second Amended Complaint, filed on July 21, 2011, asserts the following: breach of fiduciary duty of care under 29 U.S.C. § 1104(a)(1)(B) against Raymond and Ronald (counts One and Ten, respectively); prohibited party-in-interest transactions under § 1106 against Raymond and Ronald (counts Two and Nine); failure to diversify plan assets under § 1104(a)(1)(C) against Raymond, Guzek, and GRC (counts Three and Six); failure to update or maintain proper plan documents under § § 1024-27 against Raymond, Guzek, and GRC (counts Four and Seven); improper delegation of control of plan assets under § 1104(a)(1) against Raymond (count Five); and failure to prosecute a co-fiduciary's breach of fiduciary duty against Guzek, GRC, and Ronald (counts Eight and Eleven). The Complaint seeks monetary relief under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), in the form of restitution for Plan losses and disgorgement of profits. It also demands injunctive relief, including removal of Raymond as trustee; appointment of an independent trustee; an outside audit for all Plan years from 2002 to 2010; an order enjoining Raymond from ever again serving in a fiduciary capacity for an ERISA plan; and an order declaring void any provision in the Plan or its Trust Agreement that would indemnify any defendant. Finally, the Complaint requests attorneys' fees and costs under ERISA § 502(g)(1), 29 U.S.C. § 1132(g)(1).

In August 2012, the District Court found that Jeffrey lacked constitutional standing to pursue restitution and disgorgement claims because he had failed to demonstrate an actual injury to himself, as opposed to the Plan. The Court nonetheless permitted Jeffrey to pursue the other requested forms of injunctive relief. Thereafter, in September 2012, Raymond executed a corporate resolution terminating himself as trustee and appointing Reliance Trust Company to that position.[2] GRC also retained the services of an independent investment manager for the Plan. And earlier in 2012, ...


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