Crane v. Sartain

PAUL CRANE, Plaintiff,

v. CHARLOTTE SARTAIN, THE PACKER GROUP, INC., anf THEPACKER GROUP, INC. EMPLOYEE OWNERSHIP PLAN AND TRUST, Defendants.

11 C 1743

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

Date: September 27, 2012

Judge Ronald A. Guzmán

MEMORANDUM OPINION AND ORDER

When Paul Crane was terminated from The Packer Group, Inc., he was told that although he had approximately $78,000.00 in vested shares in the company's employee stock ownership plan ("ESOP"), he would not be paid due to the company's unstable financial condition. Crane filed suit under various provisions of the Employee Retirement Income Security Act ("ERISA"), alleging that the plan administrator failed to provide him with required documents, and that the defendants failed to pay him the benefits due him and breached their fiduciary duties to Crane.

Currently pending before the Court are the following motions:

(1) Plaintiff's Motion for Summary Judgment [Dkt. # 25];

(2) Defendants' Motion to Strike Plaintiff's Motion for Summary Judgment Relating to New Breach of Fiduciary Duty Claims [Dkt. # 37], which, in addition to the normal response and reply, includes a sur-reply and response to the sur-reply;

(3) Defendants' Cross-motion for Summary Judgment [Dkt. # 40];

(4) Plaintiff's Motion to Strike Defendant's Motion to Strike Plaintiff's Motion for Summary Judgment Relating to New Breach of Fiduciary Duty Claims or, in the alternative, to Amend Complaint to Conform to Evidence [Dkt. # 44]; and

(5) Plaintiff's Motion to Strike Scurrilous Statements [Dkt. # 88].

For the reasons stated below, the defendants' motion for summary judgment as to CountsI and II is denied and as to Count III is granted. Crane's motion for summary judgment as to all claims is denied. The defendants' motion to strike Crane's motion for summary judgment relating to the new breach of fiduciary duty claims, Crane's motion to strike the defendant's motion to strike Crane's summary judgment motion relating to the breach of fiduciary duty claims, and Crane's motion to strike scurrilous statements are denied as moot.

I. Analysis

A. Crane's Motion for Summary Judgment and Defendants' Cross-Motion for Summary Judgment

Crane filed suit alleging that: (1) Charlotte Sartain, as the plan administrator, failed to provide him with documents required under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1024(b)(2)-(4) (Count I); (2) the defendants failed to pay Crane the benefits due him under the company's employee stock option plan in violation of ERISA, 29 U.S.C. §1132(a)(1)(B) (Count II); and (3) the defendants breached their fiduciary duties to Crane in violation of ERISA, 29 U.S.C. § 1104 (Count III). Crane and the defendants have cross-moved for summary judgment as to each claim.

1. Facts

The court notes at the outset that contrary to the requirements of Local Rule 5.2(f), Crane has submitted as courtesy copies to the Court three oversized binders of untabbed exhibits with no indexes. Crane's failure to abide by basic filing requirements has significantly increased the time this Court has spent addressing the merits of the pending motions.

The parties agree on certain facts as stated here. Other undisputed facts are discussed as necessary in the analysis section of the order. The Court has jurisdiction pursuant to 28 U.S.C. § 1331 because the action involves application of ERISA and venue is proper in this district under28 U.S.C. § 1391 because a substantial portion of the events giving rise to the complaint occurred in this district.

Paul Crane was an employee of The Packer Group, Inc. ("TPG") until 2009 when his employment was terminated. (Defs.' Resp. Pl's. Local Rule 56.1 Statement of Facts, Dkt. # 42 ¶ 1.) TPG sponsors The Packer Group, Inc. ESOP, which is a tax qualified retirement plan under Title I of ERISA. (Id. ¶¶ 3-4.) While employed by TPG, Crane became a participant in the ESOP and has vested benefits in the ESOP in the form of TPG company shares. (Id. ¶¶ 5-6.) Defendant Charlotte Sartain is the named administrator of the ESOP and signed the 2002 ESOP Plan Document as the ESOP Trustee. (Id. ¶ 8.) She is a member of TPG's Board of Directors and is TPG's Executive Vice President of Finance. (Id. ¶ 10.)

Following Crane's termination, Sartain sent him a letter dated June 10, 2010 describing how many vested shares he held in the ESOP, the cash value and his holding's aggregate value. (Id. ¶ 17.) Crane has not yet been paid the benefits outlined in the June 10, 2010 letter. (Id.) Crane has served on Sartain multiple written requests for the production of documents related to the ESOP. (Id. ¶ 66.)

2. Analysis

A. Count I-Failure to Provide Documents

ERISA requires a plan administrator to provide certain documents to a participant or beneficiary upon request. 29 U.S.C § 1024(b)(4) ("The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary [ ] plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.").However, "[t]he universe of documents that qualify as ones under which the plan is established or operated . . . is small and is limited to those documents that formally, i.e., legally, govern the establishment or operation of the plan." Mondry v. Am. Family Mut. Ins. Co., 557 F.3d 781, 801 (7th Cir. 2009) (internal quotation marks omitted).

With respect to Crane's claim that Sartain failed to provide ESOP Plan documents, genuine issues of material fact preclude summary judgment. Crane contends that from August 2010 until March 2011, when this case was filed, Crane sent many requests for the documents both to Sartain and her counsel, but received nothing until just before the second status hearing in this case. (Pl.'s Ex. S, 5/12/2011 Hr'g Tr., Dkt. #27-23, at 4, PageID # 653.) The defendants, on the other hand, contend that on two different occasions in May 2010, Sartain tendered all of the relevant plan documents to Crane in person but he refused to accept them saying that he wanted the ESOP money and not the documents. (Defs.' Statement Add'l. Facts, Dkt. #42, ¶¶ 17-18, PageID ##931-32.)¹ The Court cannot grant summary judgment on this claim given these competing facts.

B. Count II-Failure to Pay ESOP Benefits²

Pursuant to ERISA § 1132(a)(1)(B), "[a] civil action may be brought [by a participant or beneficiary] ... to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan."29 U.S.C. § 1132(a)(1)(B). Crane contends that, while the defendants acknowledge that he is owed certain benefits under the ESOP, he has not been paid and therefore is entitled to judgment on this claim. The defendants assert that it has not been "administratively feasible" to pay Crane due to TPG's precarious financial condition, and that the decision to withhold payment is not arbitrary and capricious.³ First, though, the defendants contend that Crane failed to exhaust his administrative remedies because he did not file a written claim as required by the Plan.

i. Exhaustion

"[W]e have interpreted ERISA as requiring exhaustion of administrative remedies as a prerequisite to bringing suit under the statute." Edwards v. Briggs & Stratton Retirement Plan, 639 F.3d 355, 360 (7th Cir. 2011). The parties, however, do not agree on which version of the Plan applies. Crane contends that although it was never produced to him by the defendants, a version of the Plan effective January 1, 2009 ("2009 Plan") applies. While admitting in response to Crane's statement of additional facts that the Plan was completely restated effective January 1, 2009 and that the 2009 Restated Plan was substituted for the earlier version of the Plan, see Defs' Resp. Pl.'s Add'l Facts, Dkt. #77 ¶ 4, the defendants assert without explanation that Crane's reference to the 2009 Plan is a "red herring" as there is "no material difference betweenthe 2009 document and the prior plan documents relating to this issue." (Defs.' Corrected Reply, Dkt. #82, at 5 n.2, PageID # 3619.)⁴

The 2002 Plan states that "[a]ny person entitled to benefits must file a written claim with the Administrator on forms provided by the Administrator," (Pl.'s Ex. A-2, Dkt #27-3, ¶ 10.1, Page ID # 254), while the 2009 Plan simply states that "[a] Claimant must submit any necessary forms and needed information when making a claim under the Plan." (Pl.'s Reply Ex. E, Dkt. #55-5, § 9.05, PageID # 1716.) The Court assumes for purposes of this motion that the two plans require the same written submission in order to make a claim.

Crane contends that the November 2009 distribution request form, in which he asked that his payments for the ESOP shares be rolled over to his qualified retirement plan, constituted his written claim. The defendants do not address this argument. He also contends that Sartain did not follow Plan procedures because she did not send him a written denial which explained the basis for the denial and informed him of his appeal rights. Finally, he asserts that Sartain denied him access to administrative procedures by failing to provide the relevant Plan documents despite his requests.

The Court finds that, even if Crane was required to but did not exhaust his administrative remedies, exhaustion would have been futile. Exhaustion "encourages informal, non-judicial resolution of disputes about employee benefits" and "helps to prepare the ground for litigation in case administrative dispute resolution proves unavailing." Edwards, 639 F.3d at 360-61. However, the decision to require exhaustion is within the discretion of the trial court and maynot be necessary "where pursuing internal plan remedies would be futile." Id. at 361. Here, exhaustion would be futile as both parties' positions are...