Malinowski v. Lichter Grp., LLC

165 F.Supp.3d 328

Steven Malinowski, et al., Plaintiffs

v.The Lichter Group, LLC, Defendant.

CIVIL NO. JKB-14-917

United States District Court, D. Maryland.

Signed January 28, 2016

James Edward Rubin, The Rubin Employment Law Firm PC, Rockville, MD, Steven Bennett Blau, Blau Leonard Law Group LLC, Huntington, NY, for Plaintiff.

James Edward Dickerman, Mark Patrick Johnson, Eccleston and Wolf PC, Hanover, MD, for Defendant.

MEMORANDUM

James K. Bredar, United States District Judge

Steven Malinowski, James E. Miley, Ray Dotzler, Andrew L. Frantz, and Wayne P. McMillen (collectively, “Plaintiffs”), citizens of New York and Pennsylvania and former employees of Trojan Horse, Ltd. (“Trojan Horse”), brought a proposed class action in diversity against The Lichter Group, LLC (“LGLLC” or “Defendant”), a limited liability company organized under the laws of the State of Maryland.¹ Plaintiffs accuse Defendant of negligent misrepresentation and professional negligence under Maryland law, in relation to certain auditing services that Defendant provided in 2011 and 2012.

Now pending before the Court is Defendant's Motion for Summary Judgment (ECF No. 41), filed pursuant to Rule 56 of the Federal Rules of Civil Procedure. Also pending are Plaintiffs' “Motion Pursuant to FRCP Rule 60(b)(1) ” for reconsideration of the Court's Order of August 26, 2015 (ECF No. 50)² and Plaintiffs' Motion for Class Certification (ECF No. 53). The issues have been briefed, and no hearing is required, see Local Rule 105.6 (D. Md. 2014). For the reasons explained below, Defendant's Motion will be GRANTED, and Plaintiffs' Motions will be DENIED.

I. Overview

A. Factual Background³

Plaintiffs are former employees of Trojan Horse, a United States Postal Service transportation contractor. (ECF No. 38 ¶ 17.) Plaintiff Malinowski was employed as a manager at the Trojan Horse facility in Bethpage, New York; the remaining Plaintiffs were employed as truck drivers. (Id. ¶¶ 4-13.) In 2009, Trojan Horse established the Trojan Horse, Ltd. 401(k) Plan (“the Plan”) (id. ¶ 20), an employee benefit plan governed by the Employee Retirement Income Security Act (“ERISA”) of 1974, as amended, 29 U.S.C. §§ 1001 et seq. Pursuant to section 103 of ERISA, employee benefit plans are subject to detailed reporting requirements: an annual report must be filed with the Department of Labor (“DOL”) and furnished to plan participants. 29 U.S.C. § 1023(a). The annual report must be accompanied by a financial statement and the written opinion of an independent qualified public accountant, “who shall conduct such an examination...as the accountant may deem necessary to enable the accountant to form an opinion as to whether [documents included with the annual report] are presented fairly in conformity with generally accepted accounting principles.” § 1023(a)(3)(A). Defendant here was retained to perform such an audit of the Plan's financial statements for the years ending December 31, 2009, 2010, and 2011. Defendant's audit reports were attached to the Plan's annual submissions, which, pursuant to 29 C.F.R. § 2520.103–1, included Form 5500 “Annual Return/Report of Employee Benefit Plan” and accompanying schedules.⁴

The thrust of Plaintiffs' Amended Complaint is that Defendant's audit reports for 2010 and 2011 contained material omissions regarding Plan contributions/arrearages and the Plan's fair value and that the audits “failed to adhere to generally accepted auditing standards.” (ECF No. 49 at 2.)⁵ By year-end 2011, Trojan Horse's employer contributions were several quarters behind, such that the company owed over $700,000 to the Plan. (ECF No. 13–11 at 7, 9.) Plaintiffs believe that Defendant's audit reports did not accurately reflect this deficiency; they further contend that the reports “were required to...put the DOL or...participants on notice of any irregularities in...accounting and compliance.” (ECF No. 38 ¶ 78.) Thus, although Plaintiffs make no suggestion that Defendant itself converted or misdirected the subject funds, they nevertheless believe Defendant is responsible for the losses they apparently sustained.⁶

Plaintiffs propose a class defined as follows:

All present and former truck drivers, managers and supervisors employed by TROJAN HORSE, LTD, who were participants in the Trojan Horse Ltd. 401 (K) [sic ] Plan...and sustained economic loss during the applicable statutory period, as a result of [Defendant's] negligent misrepresentations and professional negligence in acting as the Plan auditor. (Id. ¶ 33.)

B. Procedural History

Plaintiffs filed an initial Complaint on March 25, 2014, alleging that Defendant breached its fiduciary duties and engaged in prohibited transactions under ERISA. (ECF No. 1 at 16-17.) Thereafter, Defendant filed a Motion to Dismiss (ECF No. 13), and Plaintiffs filed a Motion for Leave to File an Amended Complaint (ECF No. 24). In a pair of Memorandum Opinions dated February 26, 2015, and March 11, 2015 (ECF Nos. 30 & 33), United States District Judge William D. Quarles, Jr., narrowed Plaintiffs' action to a single count sounding in negligence; thereafter, Plaintiffs filed a conforming Amended Complaint. (ECF No. 38.)⁷ On March 25, 2015, Judge Quarles entered a Scheduling Order, setting deadlines for, inter alia , Rule 26(a)(2) disclosures and the close of discovery. (ECF No. 39.)

On July 17, 2015, Defendant filed the pending Motion for Summary Judgment. (ECF No. 41.) Shortly thereafter, Plaintiffs filed a Motion Pursuant to Rule 16 [ (b)(4) ] for an Order Modifying the Scheduling Order. (ECF No. 42.) On August 26, 2015, Judge Quarles granted in part and denied in part Plaintiffs' Motion, extending the deadlines for discovery and requests for admission by sixty days but declining to extend the deadlines for Rule 26(a)(2) disclosures. (ECF No. 48.) On September 3, 2015, Plaintiffs filed a response in opposition to Defendant's pending summary judgment motion (ECF No. 49), to which response Defendant later replied (ECF No. 52). Also on September 3, Plaintiffs filed a Motion for Reconsideration of Judge Quarles's Order of August 26 (ECF No. 50); Defendant opposed reconsideration (ECF No. 51). Finally, on October 7, 2015, Plaintiffs filed a Motion for Class Certification (ECF No. 53); that Motion is fully briefed (ECF Nos. 55 & 56). The case was transferred to the undersigned on January 14, 2016, and the pending Motions (ECF Nos. 41, 50 & 53) are ripe for decision.

II. Plaintiffs' Motion for Reconsideration (ECF No. 50)

In their Motion for Reconsideration, filed pursuant to Rule 60(b), Plaintiffs ask the Court to reassess Judge Quarles's August 26, 2015, decision, to the extent that Judge Quarles declined to modify the deadline for rebuttal Rule 26(a)(2) disclosures.

Rule 60(b) provides that “[o]n motion and just terms, the court may relieve a party...from a final judgment, order, or proceeding” for, among other reasons not applicable here, “mistake, inadvertence, surprise, or excusable neglect.” As the Court of Appeals for the Fourth Circuit has recognized, the Rule 60(b) remedy is “extraordinary” and should only be granted in “exceptional circumstances.” In re A.H. Robins Co. , 166 F.3d 1208, 1998 WL 904717, at *1 (4th Cir.1998) (per curiam) (unpublished table disposition); see also Ngatia v. Dep't of Pub. Safety & Corr. Servs. , Civ. No. WDQ–14–0899, 2015 WL 7012672, at *3 (D.Md. Nov. 12, 2015) (“[W]hen a Rule 60(b) 'motion does not raise new arguments, but merely urges the court to ‘change its mind,‘ relief is not authorized.”’ (quoting Medlock v. Rumsfeld , 336 F.Supp.2d 452, 470 (D.Md.2002), aff'd , 86 Fed.Appx. 665 (4th Cir.2004) )). Before a party may secure relief under any of Rule 60(b)'s enumerated grounds, the party “first must show 'timeliness, a meritorious [claim or] defense, a lack of unfair prejudice to the opposing party, and exceptional circumstances.”' Dowell v. State Farm Fire & Cas. Auto. Ins. Co. , 993 F.2d 46, 48 (4th Cir.1993) (quoting Werner v. Carbo , 731 F.2d 204, 207 (4th Cir.1984) ).

Assuming Plaintiffs' Motion is timely, and putting to one side the question of unfair prejudice, Plaintiffs have not demonstrated exceptional circumstances such as would warrant Rule 60(b) relief. Plaintiffs contend that they were unable to comply with the original July 7, 2015, deadline for rebuttal Rule 26(a)(2) disclosures because defense counsel did not reveal the identities of Defendant's auditors until May 19, 2015, and because it took additional time to arrange the depositions of these auditors. (ECF No. 50–1 at 5.)⁸ Plaintiffs add that Defendant's expert-witness disclosures, which it served on June 23, 2015, did not comport with the requirements of Rule 26(a)(2)(C), and that Plaintiffs were thus “effectively precluded from providing fully responsive and meaningful...rebuttal disclosures.” (Id. at 7.)⁹ Assuming arguendo that the delays to which Plaintiffs allude were beyond their control, and assuming further that Defendant's witness disclosures were legally insufficient, Plaintiffs should have filed timely motions to extend the dates and deadlines in the Scheduling Order and to compel adequate disclosures. Instead, Plaintiffs waited until July 31, 2015—more than two months after Defendant revealed the auditors' identities, more than a month after it provided its witness disclosures, and over three weeks after rebuttal disclosures came due.¹⁰ At no point, either in their underlying Rule 16(b)(4) Motion before Judge Quarles or in their Motion for Reconsideration pending before the undersigned, have Plaintiffs proffered a reasonable explanation for their tardiness.¹¹

In any event, as will become clear in Part III.C, infra , Plaintiffs have failed to advance a meritorious negligence claim, and Defendant is therefore entitled to judgment as a matter of law. Reconsideration of Judge Quarles's prior Order would thus be futile, and accordingly, Plaintiffs' Motion for Reconsideration (ECF No. 50) will be DENIED.

III. Defendant's Motion for Summary...