Ret. Comm. of Dak Ams. LLC v. Smith

135 F.Supp.3d 396

RETIREMENT COMMITTEE OF DAK AMERICAS LLC, as Plan Administrator of the DAK Americas LLC Pension Plan; and Transamerica Retirement Solutions Corporation, Plaintiffs,

v.Rodney B. SMITH, David W. Allen, Michael Lynn Bass, Joseph Alexander Bellamy, Mark Stephen Brewer, Jerome Bryant, Harold E. Corbett, Kelvin L. Galloway, Warren Albert Garrison, James F. Holland, William Lacey Nelson, Sidney Hugh Rhodes, Jimmie Ray Sellers, Mendell W. Smith, and Otella Irene Webb, Defendants.

No. 7:14–CV–36–FL.

United States District Court, E.D. North Carolina. Southern Division.

Signed Sept. 29, 2015.

Marianne Hogan, William J. Delany, Morgan, Lewis & Bockius LLP, Washington, DC, Sarah Dees Miranda, James Scott Flowers, Hutchens, Senter, Kellam & Pettit, P.A., Fayetteville, NC, for Plaintiffs.

Michael L. Miller, Ward and Smith PA, Asheville, NC, Thomas S. Babel, Ward and Smith, P.A., Wilmington, NC, for Defendants.

ORDER

LOUISE W. FLANAGAN, District Judge.

This matter comes before the court on motions for summary judgment filed by defendants Mark Stephen Brewer ("Brewer"), Harold E. Corbett ("Corbett"), Warren Albert Garrison ("Garrison"), James F. Holland ("Holland"), William Lacey Nelson ("Nelson"), Sidney Hugh Rhodes ("Rhodes"), and Jimmie Ray Sellers ("Sellers") (DE 114); and defendant Rodney B. Smith ("Rodney Smith") (DE 130). Also before the court are plaintiffs' motions for summary judgment (DE 153, 181) and to strike expert testimony (DE 157), as well as the parties' joint motion for hearing (DE 152). The motions have been fully briefed, and the issues raised are ripe for ruling.

STATEMENT OF THE CASE

Plaintiffs filed suit on February 20, 2014, under § 502(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(3), to recover alleged overpayments of pension benefits made to defendants (collectively the "alleged overpayments"). Plaintiffs seek equitable restitution of the alleged overpayments, which they claim belong in good conscience to the DAK Americas LLC Pension Plan (the "Plan"). Plaintiffs seek an order requiring defendants to return the alleged overpayments to the Plan, along with pre- and post-judgment interest, attorneys' fees, and costs. Plaintiffs obtained, on March 24, 2014, a consent preliminary injunction pending final resolution of this matter enjoining defendants from spending, transferring, or otherwise diminishing the alleged overpayments.

One subset of defendants, denominated by the parties as the "Baker" defendants,¹ filed an answer on May 2, 2014. The Baker defendants comprise David W. Allen ("Allen"), Michael Lynn Bass ("Bass"), Joseph Alexander Bellamy ("Bellamy"), Jerome Bryant ("Bryant"), Kelvin L. Galloway ("Galloway"), Mendell W. Smith ("Mendell Smith"), and Otella Irene Webb ("Webb"). While denying that there was an overpayment of pension benefits to them, the Baker defendants state that they have returned the alleged overpayments to plaintiffs. The Baker defendants filed counterclaims on August 25, 2014, and September 4, 2014, as amended, asserting (1) breach of fiduciary duty and surcharge against both plaintiffs; (2) constructive fraud against plaintiffs; (3) a claim to recover benefits due based on the terms of the Plan; (4) a claim to recover benefits due based upon an alleged reduction of accrued benefits or subsidies; and (5) a claim of equitable restitution based upon equitable estoppel. The Baker defendants seek return of the alleged overpayments; surcharge and damages, plus interest; constructive trust; interest, costs, and attorneys' fees; and such further relief as the court may deem just and proper.

Another subset of defendants, denominated by the parties as the "Ward" defendants, ² filed an answer and counterclaim, as amended, on July 3, 2014. The Ward defendants comprise Brewer, Corbett, Garrison, Holland, Nelson, Rhodes, and Sellers. The Ward defendants deny that there was an overpayment of pension benefits mistakenly made to them, and they admit that they hold and have refused to return the alleged overpayments. The Ward defendants assert the following counterclaims: (1) breach of fiduciary duty and surcharge, and (2) constructive fraud. The Ward defendants seek dismissal of the complaint; damages and surcharge in excess of $25,000.00, plus interest; costs; and such further relief as the court may deem just and proper.

Defendant Rodney B. Smith ("Rodney Smith") filed an answer and counterclaim on February 17, 2015.³ Defendant Rodney Smith denies that there was an overpayment of pension benefits to him, and states he has not returned any alleged overpayment. Defendant Rodney Smith asserts the following counterclaims: (1) breach of fiduciary duty and surcharge, and (2) constructive fraud. Defendant Rodney Smith seeks dismissal of the complaint; damages and surcharge in excess of $25,000.00, plus interest; costs; reasonable attorneys' fees; and such further relief as the court may deem just and proper.

Plaintiffs filed their first motion for summary judgment on February 17, 2015, (DE 153), seeking judgment as a matter of law on their claim for equitable restitution against all defendants, and on all counterclaims asserted by the Baker and Ward defendants.⁴ The Baker and Ward defendants responded in opposition,⁵ and plaintiffs replied.

The Ward defendants filed a motion for summary judgment on February 17, 2015, (DE 114), seeking judgment as a matter of law on plaintiffs' claim for equitable restitution.⁶ Plaintiffs responded in opposition. ⁷

Defendant Rodney Smith filed a motion for summary judgment on February 17, 2015, (DE 130), seeking judgment as a matter of law on plaintiffs' claim for equitable restitution, and advancing arguments in favor of his counterclaims.⁸ Plaintiffs responded in opposition,⁹ and defendant Rodney Smith replied.

Plaintiffs filed their second motion for summary judgment on April 10, 2015, (DE 181), seeking judgment as a matter of law on defendant Rodney Smith's counterclaims. Defendant Rodney Smith responded in opposition.¹⁰

On February 17, 2015, plaintiffs filed a motion to exclude expert reports and testimony of Gaston and Roth, which are relied upon by defendants in support of their motions for summary judgment and counterclaims. Defendant Rodney Smith responded in opposition, and plaintiffs replied. The parties also filed a joint motion for hearing on February 17, 2015.

STATEMENT OF UNDISPUTED FACTS

Defendants are former employees of DAK Americas LLC ("DAK") who worked at a DAK manufacturing facility in Wilmington, North Carolina, (the "Cape Fear facility"). They are former participants in the Plan, which was established by DAK "to assist its employees in providing a life income for their support following their retirement from" employment with DAK. (AR 10).¹¹ The Plan is administered by plaintiff Retirement Committee of DAK Americas LLC (the "Committee"). The Plan contracts with plaintiff Transamerica Retirement Solutions Corporation ("Transamerica") to provide certain fiduciary and administrative services in connection with the operation of the Plan, including calculating and executing pension benefit distributions.

In or about June 2013, DAK announced that it was planning to close the Cape Fear facility. On July 23, 2013, DAK amended the Plan "in order to provide for an immediate lump-sum option" for payment of Plan benefits to participants terminated as a result of the closure of the Cape Fear facility. (AR 003). The July 23, 2013 Plan amendment, captioned "Amendment No. One," (hereinafter referred to as "Amendment One"), added a new Section 4.15 to the Plan, which provides as follows:

4.15 Special Immediate Payment for Certain Participants: Each Participant in the group of Participants at the Employer's Cape Fear site who is severed from service with the Employer as a result of closing the Employer's plant at the Cape Fear site on or about September 1, 2013 (a "Cape Fear Participant") shall, subject to the spouse consent requirements of Section 4.10(c)(2), have the option to elect to receive an immediate lump sum distribution within 60 days following such severance from service. Such lump sum shall be Actuarially Equivalent to the Cape Fear Participant's Accrued Benefit and shall not be available if the Cape Fear Participant does not elect it with such time period. Any such Cape Fear Participant who has not yet reached his Early Retirement Age also shall have the option to receive an actuarially equivalent (determined on the basis of the Applicable Interest Rate and the Applicable Mortality Table defined in Section 2.1(a)(2)) immediate annuity payable in the form of a Qualified Joint and Survivor Annuity or a Joint and Survivor annuity (as described in Section 4.11(a)(2)) with 75 percent of the amount payable to the Cape Fear Participant payable to the Cape Fear Participant's Surviving Spouse after the Cape Fear Participant's death.

(AR 003).¹²

Defendants were separated from service with DAK in or about September or October 2013. (See, e.g., AR 232; DE 139–7). Between September 16, 2013, and October 15, 2013, Transamerica sent each defendant a letter informing them that the Plan "is offering you a limited time opportunity to elect a lump sum payment representing the entire value of your vested accrued pension benefit under the Plan." (E.g., AR 201; DE 139–4) (hereinafter the "initial distribution letters"). The initial distribution letters contain identical introductory form language and offer each defendant an opportunity to complete a "Voluntary Lump Sum Application" (hereinafter the "initial Lump Sum Application") (Id. ). The initial distribution letters state that "[t]he special one-time lump sum payment will be valued as of October 1, 2013," and note "[y]ou also have the opportunity to begin receiving a monthly annuity benefit paid in accordance with the normal terms of the Plan." (Id. ). Each initial distribution letter then states "[t]he lump sum value of your accrued pension benefit under the Plan...