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Acosta v. WPN Corp.

United States District Court, W.D. Pennsylvania

August 3, 2018



          Nora Barry Fischer, United States District Judge


         Plaintiff, the Secretary of Labor, U.S. Department of Labor (“DOL”), brings this action under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001, et seq. (“ERISA”), for Defendants' alleged failure to adequately discharge their duties as fiduciaries of the Wheeling Corrugating Company Retirement Security Plan and Salaried Employees' Pension Plan of Severstal Wheeling, Inc. (the “Plans”), resulting in the purported loss of approximately $7 million. Presently before the Court is the Motion to Disqualify Plaintiff's Expert Witness, Dr. Susan Mangiero, (Docket No. 166), filed by Michael DiClemente (“DiClemente”), Dennis Halpin (“Halpin”), and the Severstal Wheeling, Inc. Retirement Committee (“the Retirement Committee”) (collectively, “Defendants”).

         The Court has now reviewed the Motion, (Docket No. 166), the Brief in Support of the Motion, (Docket No. 167), Plaintiff's Brief in Opposition, (Docket No. 170), the expert report of Dr. Susan Mangiero dated December 11, 2017 (Docket No. 167-2 (“Mangiero Report”)), the expert rebuttal report of Dr. Susan Mangiero dated February 16, 2018, (Docket No. 167-3 (“Mangiero Rebuttal Report”)), and the transcript of the deposition of Dr. Susan Mangiero that took place on February 28, 2018, (Docket No. 167-6 (“Mangiero Dep.”)). The Court heard oral argument on the Motion and supplemental briefing at its hearing on May 22, 2018, during which the Court heard testimony from Dr. Susan Mangiero. (May 22, 2018 Hearing Tr.). The motion is now ripe. After careful consideration of the parties' positions, and for the following reasons, Defendants' Motion is DENIED.

         II. BACKGROUND[1]

         A. Factual Summary

         The parties in this case do not dispute the underlying facts, namely that the Retirement Committee oversaw assets held in the Plans for the benefit of employees of Severstal Wheeling, Inc. (and predecessors) and that Ronald Labow and WPN Corporation (collectively, “Labow”) served as the investment manager for those assets for many years with broad discretion. (Docket No. 167 at 2-3). On November 3, 2008, because the then-trustee of the WHX Trust would no longer serve as trustee after 2008, the Plans' assets were transferred by Labow to a standalone trust specific to Severstal (the “Severstal Trust”). (Id. at 3). The Retirement Committee instructed Labow to make this transfer and accepted into the Severstal Trust an account with Neuberger Berman as the majority of the Plans' interest. (Id.; Docket No. 170 at 2 (approximately 97% of the value of the Neuberger Berman account was held in eleven large cap energy stocks)). The Retirement Committee knew the Plans' assets were going to be divested from the WHX Trust, but did not follow up with Labow to confirm what assets from the WHX Trust would be transferred into the Severstal Trust or actively manage those assets once deposited. (Id. at 3).

         The Retirement Committee did not formally engage the services of Labow for the assets placed into the Severstal Trust until December 5, 2008, when the previous Investment Management Agreement with Labow was amended and backdated to November 1, 2008. (Docket Nos. 167-7 at ¶ 15, 148 at 3). During this time, the Retirement Committee engaged Mercer Investment Consultants to monitor and provide periodic portfolio reviews of Labow. (Docket No. 167-7 at ¶ 16). Following a review of the Plans' assets by Mercer, the Retirement Committee learned on December 29, 2008 that the Plans' assets were largely undiversified and immediately informed Labow. (Id. at ¶ 18-19). Labow failed to take any action until March 24, 2009, when the account was converted to cash. (Docket No. 148 at ¶ 27-29). Labow continued to take no action to invest the cash and, ultimately as a result, the Committee terminated Labow's services on May 19, 2009. (Id.).

         In its Second Amended Complaint, the DOL alleges that the Retirement Committee and its members, DiClemente and Halpin, failed to properly oversee the Plans and monitor Labow in breach of their fiduciary duties and in violation of ERISA. (Docket No. 148 at ¶ 11). In the alternative, the DOL alleges that the backdating of the IM Agreement was ineffective to relieve Defendants from responsibility or liability for any responsibility, obligation or duty they had to invest the Plans' assets under ERISA. (Id. at ¶ 12). To support their position, the DOL has designated Dr. Susan Mangiero to provide an expert opinion regarding the prevailing fiduciary standards in 2008 and 2009 for retirement committee fiduciaries who monitor investment managers for retirement plans, as well as the actual monitoring of the Plans' investment managers, or lack thereof, by the Retirement Committee in this case. (See Mangiero Report; Mangiero Rebuttal Report).

         B. Dr. Mangiero's Qualifications

         Dr. Susan Mangiero is a forensic economist with extensive professional training and industry experience in the financial arena. (Mangiero Report at 4). She earned a Ph.D. in finance from the University of Connecticut, a Master's in Business Administration in finance from New York University, a Master of Arts degree in economics from George Washington University and a Bachelor of Arts degree in economics from George Mason University. (Id.). Dr. Mangiero is also an Accredited Investment Fiduciary Analyst™, Chartered Financial Analyst®, a Certified Financial Risk Manager, a FINRA Trained Neutral, a Professional Plan Consultant™, a Certified Fraud Examiner, and a member of the Association of Certified Fraud Examiners Advisory Board. (Id.).

         She is currently employed as a managing director with Fiduciary Leadership, LLC, where she provides compliance, dispute and litigation support to asset managers, banks, companies, institutional investors and their counsel. (Id. at 48). Prior to working with Fiduciary Leadership, LLC, she worked on multiple trading desks, including foreign exchange, futures, options, swaps and other over-the-counter derivatives, fixed income securities and money market instruments. (Id.). Of particular note, Dr. Mangiero is also affiliated with the Analysis Group, a group co-founded and run by Defendants' retained expert, Dr. Bruce E. Stangle.[2]

         Dr. Mangiero also has significant experience leading numerous ERISA-focused training programs for and with retirement plan fiduciaries, advisors and regulators, including the U.S. Department of Labor. (Id. at 6). She speaks and writes frequently on topics including risk management, asset manager and investment consultant due diligence, monitoring of asset managers, and ERISA investment best practices. (Id.). She has also offered expert testimony and forensic investigations in connection with various arbitration, mediation, litigation and industry advisory proceedings and has over twenty years of experience in capital markets, global treasury, asset-liability management, portfolio management, economic and investment analysis, derivatives, financial risk control and valuation. (Id.). At this point in the litigation, Dr. Mangiero has produced one expert report dated December 11, 2017, an expert rebuttal report dated February 16, 2018, testified in a deposition on February 28, 2018, and testified in Court on May 22, 2018.

         C. Dr. Mangiero's Opinions

         The DOL has proffered Dr. Mangiero as an expert witness to assist the fact finder in understanding the prevailing standard for the Retirement Committee fiduciaries monitoring their investment manager, Mr. Labow, and determining whether or not they met the standard that was required of them under ERISA. (Mangiero Report at 3-4). In her expert report, Dr. Mangiero explains that the “prevailing fiduciary standard in 2008 and 2009 required ERISA committee members to carry out multiple tasks on behalf of plan participants” and, to the extent “committee members chose to delegate some of its responsibilities to outside parties, the prevailing fiduciary standard required ERISA committee members to adequately monitor those parties.” (Mangiero Report at ¶ 41). Where, as here, the employer appoints an investment manager, “the employer is responsible for the selection of the manager” and is “required to monitor the manager periodically to assure that it is handling the plan's investments prudently and in accordance with the appointment.” (Id. (citing Meeting Your Fiduciary Responsibilities, ” U.S. Dept. of Labor, Feb. 2012)). Dr. Mangiero opines that the Retirement Committee had a duty to “carefully monitor” Labow, (Mangiero Report at ¶ 40(a), (b)), and that it “did not do as much as [it] could have and should have” done, (Mangiero Rebuttal Report at ¶ 6). She explains that “[c]areful monitoring by ERISA fiduciaries is always important but especially during a period when major changes to a plan must be completed. . . . This transfer [to the ...

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