Harris v. Koenig

51 Employee Benefits Cas. 2601

815 F.Supp.2d 12

William S. HARRIS, et al., Plaintiffs,

v.James E. KOENIG, et al., Defendants.

Civil Action No. 02–618 (GK).

United States District Court, District of Columbia.

Oct. 3, 2011.

Bryan Taylor Veis, McTigue & Porter, James Brian McTigue, James A. Moore, McTigue & Veis, LLP, Gregory Yann Porter, Bailey & Glasser, LLP, Washington, DC, Athanasios Basdekis, Brian A. Glasser, John W. Barrett, Bailey & Glasser LLP, Charleston, WV, Ellen M. Doyle, Joel R. Hurt, John Stember, Pamina G. Ewing, Stember Feinstein Doyle & Payne, LLC, Pittsburgh, PA, James B. Perrine, Bailey & Glasser, LLP, Montgomery, AL, for Plaintiffs.

Matthew J. O'Hara, Peter E. Pederson, Jr., Hinshaw & Culbertson, LLP, Matthew R. Kipp, Skadden, Arps, Slate, Meagher & Flom LLP, Wilber H. Boies, Kristen C. Klanow, McDermott, Will & Emery, Phillip L. Stern, Neal, Gerber & Eisenberg LLP, Chicago, IL, Shannon M. Barrett, Gary Steven Tell, Robert N. Eccles, Theresa S. Gee, O'Melveny & Myers, L.L.P., Richard L. Brusca, Skadden, Arps, Slate, Meagher & Flom LLP, Washington, DC, Charles R. Work, Mark Hunter Churchill, McDermott Will & Emery, LLP, Washington, DC, Abby C. Johnston, Paul B. Salvaty, O'Melveny & Myers LLP, Los Angeles, CA, Daniel A. Curto, McDermott Will & Emery, Boston, MA, for Defendants.

MEMORANDUM OPINION

GLADYS KESSLER, District Judge.

Plaintiffs William S. Harris, Reginald E. Howard, and Peter M. Thornton, Sr. are former employees of Waste Management Holdings, Inc. (“Old Waste”) and participants in the Waste Management Profit Sharing and Savings Plan (“Old Waste Plan” or “Plan”). They bring this action on behalf of the Plan's approximately 30,000 participants under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001, et seq., against Defendants, ¹ all of whom were fiduciaries of the Old Waste Plan ² or of its successor plan, the Waste Management Retirement Savings Plan (“New Waste Plan”).³

This matter is presently before the Court on the Waste Management Defendants' ⁴ Motion for Summary Judgment Based on the Statute of Limitations (“WM Mot.”) [Dkt. No. 446], Defendants Koenig and Tobecksen's Motion for Summary Judgment (“Koenig Mot.”) [Dkt. No. 439], and Plaintiffs' Cross Motion on Statute of Limitations and Release and in Opposition to Defendants' Motions for Summary Judgment on These Defenses (“Pls.' Mot.”) [Dkt. No. 471–1]. Upon consideration of the Motions, Oppositions, Replies, and the entire record herein, the Court concludes that Defendants' Motions for summary judgment are granted in part and denied in part. Plaintiffs' summary judgment Motion is denied.

I. Background ⁵

This action arises from Old Waste's announcement on February 24, 1998, that it had materially overstated its reported income by approximately $1.3 billion prior to 1992 and continuing through the first three quarters of 1997, and that it was therefore restating several of its financial statements for periods between 1991 and 1997. That announcement led to the filing of a securities class action in the United States District Court for the Northern District of Illinois, which settled on September 17, 1999 (“Illinois Litigation”). ⁶ Under the terms of the settlement (“Illinois Settlement”), Old Waste and its agents were released from liability for any claims—including unknown claims—brought by members of the Illinois Settlement Class in exchange for $220 million, of which the New Waste Plan recovered $86,609.76. In 1999, New Waste announced further after-tax charges and adjustments of $1.23 billion. That announcement led to the filing of additional securities class action complaints against New Waste and certain of its officers and directors in the Southern District of Texas, which settled on April 29, 2002 (“Texas Litigation”). Both settlements included the Plan and its fiduciaries within the scope of the class.

On April 1, 2002, Plaintiffs filed suit in this Court, alleging ten counts of ERISA violations pursuant to ERISA § 502(a)(2), codified as 29 U.S.C. § 1132(a)(2).⁷ Plaintiffs' claims were originally divided into three periods. First, Plaintiffs alleged five ERISA violations related to the Plan's purchase of inflated shares of Company Stock in the first claim period between January 1, 1990, and February 24, 1998 (Counts I–V, the “First Period Claims”). Second, Plaintiffs alleged four ERISA violations related to the release of claims by the Plan's fiduciaries in the Illinois Litigation in the second claim period between July 15, 1999, and December 1, 1999 (Counts VI–IX, the “Second Period Claims”). Third, Plaintiffs alleged one ERISA violation related to the release of claims by the New Waste Plan's Trustee—Defendant State Street ⁸—in the Texas Litigation in the third claim period between February 7, 2002, and July 15, 2002 (Count X).

On March 12, 2009, this Court dismissed Counts I–V as time-barred under ERISA § 413 because Plaintiffs had “actual knowledge of the breach or violation” more than three years before filing the original Complaint. Harris v. Koenig, 602 F.Supp.2d 39, 52 (D.D.C.2009) (“ Harris I”). At that time and based on the allegations contained in the Third Amended Complaint, the Court also rejected Plaintiffs' argument that the three-year limitation period should be tolled under the statute's fraudulent concealment provision, finding that Defendants' failure to disclose material information did not constitute an act of concealment under ERISA. Id. at 52–53.

On December 14, 2009, Plaintiffs were granted leave to file a Substitute Fourth Amended Complaint (“4th Am. Compl.”) [Dkt. No. 280]. Harris v. Koenig, 673 F.Supp.2d 8, 14–15 (D.D.C.2009) (“ Harris II”). In their Fourth Amended Complaint, Plaintiffs amended Counts I–V to include new allegations which would establish fraudulent concealment—namely, that certain Old Waste Plan fiduciaries “fraudulently misstated, or caused to be fraudulently misstated, material financial information contained in disclosures required by ERISA and the 1934 Act.” 4th Am. Compl. ¶ 79. Plaintiffs also added Counts XIII and XIV, which alleged Defendant State Street's violation of ERISA § 406(b)(2) in the Illinois and Texas Litigations.⁹

On January 15, 2010, the following Motions to Dismiss were filed by Defendants pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6): (1) the Waste Management Defendants' Motion to Dismiss Counts I–V and Counts VII–IX [Dkt. No. 294]; (2) the Individual Waste Management Defendants' ¹⁰ Motion to Dismiss Counts I–V [Dkt. No. 291]; and (3) Defendant State Street's Motion to Dismiss Counts XIII and XIV [Dkt. No. 292]. On June 10, 2010, the Court denied the Waste Management Defendants' Motion to Dismiss Counts I–V and VII–IX, and granted in part and denied in part the Individual Waste Defendants' Motion to Dismiss.¹¹ Harris v. Koenig, 722 F.Supp.2d 44, 64–65 (D.D.C.2010) (“ Harris III”). Defendant State Street's Motion to Dismiss was granted with respect to Counts XIII and XIV. Id.

On November 12, 2010, 271 F.R.D. 383 (D.D.C.2010), Plaintiffs filed a Fifth Amended Complaint (“FAC”). In this Complaint, Plaintiffs withdrew Count X on the basis that the evidence obtained in discovery was insufficient to prove the claim. The Fifth—and final—Amended Complaint now includes the following claims.

In the first claim period, January 1, 1990, to February 24, 1998, Count I alleges that the Old Waste Investment Committee and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA § 404 by failing to prudently manage the assets of the Plan; Count II alleges that the Old Waste Administrative Committee and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA § 404 by failing to provide complete and accurate information to Plan participants and beneficiaries; Count III alleges that Old Waste, the Old Waste Administrative Committee, the Old Waste Investment Committee, and any remaining Individual Defendants who are or were members of those Committees engaged in prohibited exchanges of stock between the Plan and Old Waste in violation of ERISA § 406(a)(1)(A); Count IV alleges that Old Waste, its Board of Directors, and any remaining Individual Defendants on the Old Waste Board breached their fiduciary duties under ERISA § 404 by failing to monitor the fiduciaries of the Plan; and Count V alleges that all Old Waste Fiduciaries breached their fiduciary duties under ERISA § 405(a)(2) and (3) by enabling their co-fiduciaries to commit the ERISA violations in Counts I–IV, and by failing to remedy them.

In the second claim period, July 15, 1999, to December 1, 1999, Count VI alleges that Defendant State Street breached its fiduciary duty under ERISA § 404 by failing to adequately investigate and preserve the claims in Counts I–V in the Illinois Litigation and by causing the claims to be released; Count VII alleges that Old Waste and State Street engaged in prohibited exchanges of choses in action between the New Waste Plan and Old Waste in violation of ERISA § 406(a)(1)(A) by releasing claims in the Illinois Litigation; Count VIII alleges that the New Waste Investment Committee and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA § 404 by failing to adequately monitor State Street's performance in the Illinois Litigation; and Count IX alleges that State Street, Old Waste, the New Waste Investment Committee, and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA § 405(a)(2) and (a)(3) by enabling their co-fiduciaries to commit the ERISA violations described in Counts VI–VIII, and by failing to remedy them.

On March 30, 2011, the Waste Management Defendants filed their pending Motion for Summary Judgment Based on the Statute of Limitations,...