United States District Court, E.D. Pennsylvania
SPEAR, et al.
FENKELL, et al.
RICHARD A. LLORET U.S. Magistrate Judge
parties seek reconsideration of this Court's ruling on
their respective motions for summary judgment. This
memorandum rules on them all. In Part II of this Memorandum,
I will address the Stonehenge parties' motion for
reconsideration. In Part III, I will address the Sefcovic
parties' motion for reconsideration. In Part IV, I will
address the Fenkell parties' motion for reconsideration.
In Part V, I will address the Alliance parties' motion
for clarification of the Order dated September 30, 2016.
STANDARD OF REVIEW
United States Court of Appeals for the Third Circuit has held
that the purpose of a motion for reconsideration is to
correct manifest errors of law or fact or to present newly
discovered evidence.” Cohen v. Austin, 869
F.Supp. 320, 321 (E.D.Pa.1994). Accordingly, a district court
will grant a party's motion for reconsideration in any of
three situations: (1) the availability of new evidence not
previously available, (2) an intervening change in
controlling law, or (3) the need to correct a clear error of
law or to prevent manifest injustice. Id.
courts have a strong interest in the finality of judgments.
Cont'l Cas. Co. v. Diversified Indus., Inc., 884
F.Supp. 937, 943 (E.D.Pa.1995). Because of the interest in
finality, at least at the district court level, motions for
reconsideration should be granted sparingly; the parties are
not free to relitigate issues the court has already decided.
Rottmund v. Continental Assurance Co., 813 F.Supp.
1104, 1107 (E.D.Pa.1992). Stated another way, dissatisfaction
with the Court's ruling is not a proper basis for
reconsideration. Glendon Energy Co. v. Borough of
Glendon, 836 F.Supp. 1109, 1122 (E.D.Pa.1993);
Bhatnagar v. Surrendra Overseas Ltd., 52 F.3d 1220,
1231 (3d Cir. 1995) (a motion for consideration may not be
used to give a litigant a “second bite at the
apple”). A motion for reconsideration may only address
“‘factual and legal matters that the Court may
have overlooked' and may not ‘ask the Court to
rethink what it had already thought through - rightly or
wrongly.'” Jarzyna v. Home Properties,
L.P. F.Supp.3d 2016 WL 26236888 (E.D.Pa. May 6, 2016) (citing
Glendon Energy Co., 836 F.Supp. at 1122).
THE STONEHENGE PARTIES' MOTION FOR
Stonehenge parties allege three grounds for reconsideration:
(1) the opinion erroneously fails to recognize that ERISA
greatly restricts liability and available relief against
non-fiduciaries; (2) the opinion errs by failing to
separately consider the Stonehenge defendants' statute of
limitations arguments; and (3) the opinion errs by suggesting
that ERISA preemption depends on whether plaintiffs can
successfully prove their claims and on availability of relief
under ERISA. I will address each argument separately.
THE OPINION DID NOT ERR IN FINDING THAT THE STONEHENGE
DEFENDANTS “PARTICIPATED” IN FENKELL'S
FIDUCIARY BREACHES AND IN FINDING THAT ACCOUNTING AND
DISGORGEMENT ARE “APPROPRIATE EQUITABLE
Stonehenge parties allege that the opinion erred in denying
summary judgment as to Counts IV and V on the grounds that
the Stonehenge defendants “participated” in
Fenkell's Fiduciary breaches as a matter of law. The
Stonehenge parties also allege that the court erred in
finding that the remedies of accounting and disgorgement are
“appropriate equitable relief” under ERISA. The
Fenkell and Sefcovic parties join in these arguments. I will
address these arguments together.
Under ERISA, non-fiduciaries can only be liable for
knowingly participating in prohibited transactions
(not fiduciary breaches).
parties argue that, under ERISA §406(b), non-fiduciaries
can only be liable for knowingly participating in
prohibited transactions, not merely fiduciary
breaches. The parties argue that “the Opinion's
repeated references to the Stonehenge Defendants'
non-fiduciary ERISA liability for knowing participation in
‘fiduciary violations' see e.g., Op. at 57, 59, 60,
64, 6568, rather than ‘prohibited transactions, '
is manifest error.” Stonehenge Mem. in Support of
Motion for Reconsideration (“Stonehenge Mem.”) at
parties correctly cite the standard of liability for
non-fiduciaries, which requires knowing participation in a
prohibited transaction. The opinion also correctly cites this
standard numerous times. See Op. at 58, 60, 61.
there is reference in the decision to “knowing
participation in a fiduciary breach, ” the opinion is
clearly referring to Stonehenge's participation in a
prohibited transaction, namely the spread transaction where
the payments to DBF amounted to a kickback. See e.g.
Op. at 60-62 (explaining that Stonehenge's fee of $30
million for facilitating the spread deal was
“contingent on the profitability of the Spread Deal,
and was paid through AH III via the same
‘waterfall' that generated fees for the ESOP and
Alliance.”) Any portion of the Opinion that references
participation in a fiduciary breach is hereby modified to
reflect the standard that I relied on in my analysis, but
that was sometimes referred to as a breach of fiduciary duty:
that a non- fiduciary is liable only for knowing
participation in a prohibited transaction under ERISA.
Under ERISA, receipt of plan assets is one way, but not the
only way, non-fiduciaries can “participate” in a
Stonehenge parties argue that non-fiduciaries can only
“participate” in a prohibited transaction by
receiving plan assets. Stonehenge Mem. at 2. The Fenkell and
Sefcovic parties join in this argument. I will address the
parties' arguments together.
Stonehenge cites to Harris Trust and Savings Bank et al.
v. Salomon Smith Barney Inc., et al., 530 U.S.
238, 250-253, 120 S.Ct. 2180 (2000), arguing that the Court
“repeatedly tied ERISA liability of non-fiduciaries to
the receipt of plan assets.” The parties urge the court
that reconsideration is necessary to correct a clear error of
law of fact or to prevent manifest injustice. I disagree. The
parties are attempting to relitigate an issue that has
already been discussed at length and decided. The Opinion
states, Stonehenge's primary argument is that it never
received plan assets, because it was always paid by AH III,
not Alliance Holdings or the Alliance ESOP. This, Stonehenge
argues, means that it never “participated” in a
fiduciary violation, in the sense required under Harris
Trust. The argument rests on the premise that Harris
Trust liability only attaches if a non-fiduciary
receives plan assets. I disagree. Receiving plan assets
through a prohibited transfer is one way, but not the only
way, a non-fiduciary can “knowingly participate”
in a fiduciary violation. It happens to be the type of
fiduciary violation at issue in Harris Trust.
Op. at 59 (emphasis supplied) (internal citations omitted).
Relying on Harris Trust, Iola, and the plain
language of the statute, I held that receipt of plan assets
is one way but not the only way a non-fiduciary can
“knowingly participate” in a prohibited
this framework in mind, the decision turned to whether
Stonehenge “knowingly participated” in a
prohibited transaction. I held that Stonehenge
“participated” in the prohibited transaction
based on Stonehenge's “active involvement in
managing the deal, and its $34 million in fees” which
was not materially different than [the defendant's]
commissions in Iola. Op. at 62-63. I also held that
there were issues of fact whether Stonehenge
“knowingly” participated in a fiduciary breach.
See Op. at 63-64. Knowing participation under
Harris Trust requires actual or constructive
knowledge of the facts that made the underlying transaction
unlawful. Id. at 63. The parties set forth various
facts on either side of the argument, which created a genuine
issue of material fact about whether Stonehenge actually or
constructively knew of Fenkell's fiduciary breaches.
parties argue that the Court's reliance on Iola
was misplaced because Iola is distinguishable:
[p]rincipally relying upon Iola, the Opinion notes
that ‘Barrett, the salesman in Iola, did not
receive trust assets' yet was liable for knowing
participation.” This statement fails to recognize the
central distinguishing fact that Barrett's liability
turned on his status as [an] agent of his employer (Tri-Core)
which was a fiduciary.” Stonehenge Mem. at 3 (internal
citations omitted). This argument is without merit and is
improper on a motion for reconsideration. The Stonehenge
parties are conflating the section of the opinion that
discussed whether participation requires receipt of plan
assets, see Op. at 58-60, and a subsequent section
that dealt with whether Stonehenge “knowingly
participated” in a prohibited transaction, see
Op. at 63. Stonehenge fails to cite to a manifest error of
law or fact, and is attempting to relitigate that which was
Stonehenge also argues that the opinion's reliance on
Mellon Bank, N.A. ex rel. Weiss Packing Co., Inc. Profit
Sharing Plan v. Levy, 71 Fed.Appx. 149 (3d Cir. 2003)
was “inaccurate” because in Mellon Bank,
the Court held that “the attorney did not participate
because he did not receive funds from the transaction (i.e.
he did not receive plan assets) - not because his conduct was
limited in scope.” Stonehenge Mem. at 3-4.
argument is no different from the position I rejected in the
Opinion. See Op. at 61-63. Stonehenge's
assertion that the third circuit held that the defendant did
not participate because he did not receive funds from the
transaction is a misstatement of the law, and this argument
is without merit. Mellon Bank does not stand for the
proposition that receipt of trust assets is the sine qua
non of participation. The Court provided a set of
non-exclusive factors to be taken into account when
evaluating “participation.” These factors include
whether a party “participated in the actual exchange of
money for property, ever saw profit from the transaction, or
ever possessed title or right to the property or money
involved.” Op. at 62, citing Mellon Bank, 71
149. I do not read Mellon Bank to hold that receipt
of plan assets is the only way a party can participate in a
fiduciary breach. Receipt of plan assets is one way, but not
the only way, to establish participation. I have already
decided the issue in my Opinion and will not revisit it on a
motion for reconsideration. See Op. at 61-63.
The remedy of accounting and disgorgement are appropriate
equitable remedies under ERISA.
argues that the Court made four errors in ruling that the
remedy of accounting and disgorgement are appropriate
equitable remedies: (1) “the Opinion fails to recognize
the Supreme Court's requirement that Plaintiff's must
identify ‘particular funds' that can be
‘traced' within defendant's possession before
relief can be deemed equitable”; (2) “the Opinion
errs in reasoning that the remedy of disgorgement is distinct
from the equitable remedies of restitution, constructive
trust and equitable lien”; (3) “the Opinion errs
by holding that the accounting for profits remedy permits
Plaintiffs to avoid identifying a traceable and identifiable
res”; and (4) “the Opinion errs by conflating the
need for an identifiable and traceable res with the wholly
separate issue of whether relief is available after a res is
dissipated.” Stonehenge Mem. at 4-8. The Fenkell and
Sefcovic parties join in this argument. I will address the
issue was discussed at length in the opinion and the parties
do not cite to any errors of law or fact in their motion for
reconsideration. In fact, the parties make identical
arguments, citing to the same case law (Mertens v. Hewitt
Associates, 508 U.S. 248, 256 (1993), Great-West
Life & Annuity Ins. Co v. Knudson, 534 U.S. 204, 209
(2002), and Montanile v. Board of Trustees of the
National Elevator Industry Health Benefit Plan, 136
S.Ct. 651 (2016)). The parties are merely attempting a second
bite at the apple, which is impermissible.
discussed extensively in the Opinion, see Op. at
65-70, ERISA relief against a non-fiduciary must be equitable
and appropriate under the law. Op. at 65, citing Harris
Trust, 530 U.S. at 250. Equitable remedies are those
“‘typically' available from a court of equity
before the equitable and legal jurisdictions of the federal
courts were joined in 1938.” Op. at 65, citing
Sereboff v. Mid Atlantic Medical Services, Inc., 547
U.S. 356, 362 (2006). The Opinion relied on Edmondson v.
Lincoln Nat. Life Inc. Co., 725 F.3d 406 (3d Cir. 2013),
in which the Court of Appeals held that the defendant's
“claim for disgorgement, which is akin to an accounting
for profits, is an equitable remedy available under ERISA and
Great-West Life.” Op. at 66, citing
Edmondson, 725 F.3d at 420. The opinion noted, [t]he
Supreme Court's concerns about permitting damage-like
remedies in equitable guise are well documented. These
concerns may be in tension with its ‘typically
available in equity test' when it comes to accounting and
disgorgement. Nevertheless, the Supreme Court has endorsed
accounting and disgorgement as an equitable remedy at least
three times, without actually ruling on the subject.
67, citing Knudson, 534 U.S. at 215 (quoting
Harris, 530 U.S. at 250-51); Mertens, 508
U.S. at 262; and Edmonsdon, 725 F.3d at 419 (quoting
Knudson, 534 U.S. at 214 n. 2).
argues, again, that under Montanile, a plaintiff
“may seek equitable restitution or disgorgement of
funds from a dissipated res only if the spent funds
can be traced to specific assets.” Stonehenge Mem. at
8. However, I concluded in the Opinion that
“Montanile overruled neither the holding nor
rational of Edmondson. Absent clear language from
the Supreme Court overruling the holding or rationale of
Edmondson, I must follow the Court of
Appeals.” Op. at 70, citing United States v.
Mitlo, 714 F.2d 294, 298 (3d Cir. 1983) (quoting
Allegheny Gen. Hosp. v. NLRB, 608 F.2d 965, 970 (3d
Cir. 1979)); also citing Litman v. Massachusetts Mut.
Life Ins. Co., 825 F.2d 1506, 1508 (11th Cir. 1987). The
parties fail to cite to any change in the law which would
warrant reconsideration of this decision. Since I addressed
this precise issue in the Opinion, the parties' argument
is improper on a motion for reconsideration.
SEPARATE CONSIDERATION OF THE STONEHENGE DEFENDANTS'
STATUTE OF LIMITATIONS ARGUMENTS.
Stonehenge parties allege that the Court erred in failing to
separately consider the affirmative defense of statute of
limitations with respect to each defendant. Stonehenge argues
that the plaintiffs are required to establish fraudulent
concealment against each defendant separately in order to
toll the statute of limitations. Stonehenge Mem. at 9, citing
Barker v. American Mobil Power Corp., 64 F.3d 1397,
1402 (9th Cir. 1995). There is language in Kurz v.
Philadelphia Elec. Co., 96 F.3d 1544 (3d Cir. 1996) that
supports this proposition:
when a lawsuit has been delayed because the defendant
itself has taken steps to hide its breach of fiduciary
duty, the limitations period will run six years after the
date of the claim's discovery. The relevant question is
therefore not whether the complaint ‘sounds in
concealment, ' but rather whether there is evidence that
the defendant took affirmative steps to hide its breach of
Id. at 1552 (emphasis supplied). I found that there
were genuine issues of material fact that precluded summary
judgment against the Alliance Parties on the statute of
limitations question. My opinion did not explain my finding
in any detail. I did note, however, that “for reasons I
explained in Section II of this opinion, dealing with
Fenkell's statute of limitations arguments, I conclude
that there are genuine issues of material fact that ...