rts

No. 01 C 2963 MDL No. 1417 Page 4

filed within that time limit. The remaining twelve filed within two weeks of the ESOP
deadline. The claims in counts II and III are the same grievances that were filed by plaintiffs
with the plan administrator, A suit following the completion of an ERISA-required appeals
process is “the equivalent of a suit to set aside an administrative decision, and ordinarily no
more than 30 or 60 days is allowed within which to file such a suit.” Id. at 875. Plaintiffs,
already represented by counsel, were reminded of this deadline in the final denial of their
administrative claims. This deadline and the way it was allegedly applied to plaintiffs was
reasonable.’

Defendants also move to dismiss the twelve individual plaintiffs from the fiduciary duty
claim in count I, not because it is barred by ESOP provisions, but arguing it is intricately
linked to the untimely claims. Under ERISA, a plaintiff has three years from discovery of a
breach in which to file a breach of fiduciary duty claim. 29 U.S.C. § 1113. While the ERISA
claims in counts I, I, and III are connected in that they arise from the same set of facts, the
legal theories and claims in count! are distinctive. Allowing the fiduciary claims to go forward
does not undermine the integrity of the ESOP time limit.

Motion for Summary Judgment on ERISA Claim in Count IV

Summary judgment is appropriate ifthe pleadings, depositions, interrogatory answers,
and admissions on file, together with the affidavits, show that there is no genuine issue as to
any material fact so that the moving party is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91

L.Ed.2d 265 (1986). In considering a motion for summary judgment we construe all facts in

!While the twelve plaintiffs are barred from bringing the claims in counts II and III as individuals,
we are not determining at this time whether they could be members of the purported class for the class claims
in these counts.


No, 01 C 2963 MDL No. 1417 Page3

filed severance pay claims which were denied. The reason given for the denials was that
plaintiffs were ineligible for severance benefits because they were laid off. Plaintiffs filed
administrative appeals of these denials, which were also denied.
DISCUSSION
Motion to Dismiss Untimely ESOP Claims
In deciding a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss, we accept as
true all well-pleaded factual allegations of the complaint, drawing all reasonable inferences in

a plaintiff’s favor. Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1019 (7" Cir. 1992). A claim

survives if relief could be granted under any set of facts that could be proved consistent with
the allegations. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984) citing Conley y. Gibson, 355
USS. 41, 45-46 (1957). While a complaint does not need to specify the correct legal theory to
withstand a Rule 12(b)(6) motion, the complaint must allege all elements of a cause of action
necessary for recovery. Ellsworth v. City of Racine, 774 F.2d 182, 184 (7th Cir. 1985), cert.
denied, 475 U.S. 1047 (1986).

Defendants move to dismiss twelve of the individual plaintiffs from the wrongful denial
of benefits (count II) and unlawful plan amendments (count III) claims, arguing that they filed
outside of the ESOP time limit. We will enforce contractual limitations periods, including those

in ERISA plans, as long as they are reasonable. Doe v, Blue Cross & Blue Shield United of

Wisconsin, 112 F.3d 869 (7th Cir. 1997). Plaintiffs do not contest that the identified plaintiffs
filed their complaints outside of the prescribed time limit, but argue that the limitation is
unreasonable in this case.

Here, the ESOP allows 120 days after the administrator’s final denial of a claim in

which to file a suit. Three of the plaintiffs — not challenged by defendants in this motion —


No. 01 C 2963 MDL No, 1417 Page 5

the light most favorable to the non-moving party and draw all reasonable inferences in favor

of that party. Skorup v. Modern Door Corp., 153 F.3d 512, 514 (7th Cir.1998); see Anderson

y. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Under 29 U.S.C. 1132, an ERISA plan participant may sue for benefits due him under
the terms of his plan. In count IV, plaintiffs seek severance pay allegedly due to them under
an ERISA-governed contract. Defendants argue that plaintiffs’ claims fail since they were
considered and denied under the claims procedure of the severance plan, and there is no
evidence in the administrative record that the decision was arbitrary or capricious.

The administrator of Amsted’s severance plan has discretion to deny claims and,
accordingly, we review his decision under a deferential standard. Perlman v. Swiss Bank
Comprehensive Disability, 195 F.3d 975, 981-82 (7th Cir. 1999). His decision will be

overturned only if it is arbitrary or capricious. Firestone Tire and Rubber Co. vy. Bruch, 489

U.S. 101, 114-15 (1989). Ifa claim was a genuine evaluation by an administrator, we examine
only the materials in the administrative record, and the parties should not take additional
discovery. Perlman at 981-82.

Plaintiffs ask us to invoke Federal Rule of Civil Procedure 56(f), which permits us to
refuse or continue a motion for summary judgment if it appears from affidavits that the party
opposing the motion must conduct discovery in order to properly respond. Plaintiffs have
included an affidavit from plaintiff Larry Holder, which provides that he believes that he has
not been temporarily laid off but rather permanently dismissed. They request additional
discovery, specifically depositions and affidavits of employees involved in the decision to deny
their claims, in order to support their position that the denial was arbitrary and capricious.

The parties agree that the reason given for the denial of claims was that the plaintiffs


Minutcler Form (067)

United States District Court, Northern District of Hlinois

Z

aero Magistrate Judge James B. Moran “Than Asigued Judge

CASE NUMBER 01 C 2963 - (MDL 1417) DATE 7/12/2002
CASE Juan Armstrong et al. Vs. Amsted Industries, Inc. et al.
TITLE

[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

of the motion being presented.]

qa)

MOTION:
Memorandum Opinion and Order
DOCKET ENTRY:
qd) Oo Filed motion of [ use listing in “Motion” box above.]
(2) Oo Brief in support of motion due
(3) i) Answer brief to motion due. . Reply to answer brief due
(4) ia} Ruling/Hearing on setfor. at.
(5) o Status hearing[held/continued to] (set for/re-set for]on__ssetfor_— at
(6) o Pretrial conference[held/continued to] [set for/re-set for]on__—ssetfor__——sat_
(O) Oo Trial[set for/re-set for]on_____at
(8) Qo [Bench/Jury trial] [Hearing] held/continued to___at
(9) Qa This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
COFRCP4(m) (1 General Rule21 OIFRCP41(a)(1) O FRCP41(a)(2).
ao) «off (Other docket entry) | Enter Memorandum Opinion and Order. Defendants’ motion to dismiss

untimely ESOP claims is granted in part and denied in part, and their motion for summary judgment on

the ERISA severance pay claim and to dismiss the state claims in counts IV and V is granted.

| [For further detail see order attached to the original minute order.]

No notices required, advised in open court,

No notices required, umber of notices

Notices mailed by judge’s staff. We 1 6 2002
Notified counsel by telephone. date docketed
Docketing to mail notices.

Mail AO 450 form. LYNdI Loy
v

Copy to judge/magistrate judge.

Zi Kd SI Wi CO

courtroom
WAH deputy’s
initials fo a ond AH
Dateithndtectivetth 1

central Clerk’s Office mailing deputy initials



No. 01 C 2963 MDL No. 1417 Page 6

were laid off rather than permanently terminated. In his denial letter, the plan administrator
explained why Amsted employees were categorized as laid off and explained how that
categorization made them ineligible for severance pay. There is no evidence that plaintiffs’
claims were “thrown in the trash rather than evaluated on the merits.” Perlman at 981-82.
Accordingly, plaintiffs are not entitled to discovery outside of the administrative record, and
their request for additional discovery is denied. While financially unfortunate for the
plaintiffs, the decision made and reasons given do not rise to the level of arbitrary or

capricious conduct required for judicial intervention. See Perlman, Bruch, supra.

Finally, plaintiffs concede that the state claims in counts IV and V are preempted by

federal law and, accordingly, those claims are dismissed.
CONCLUSION

For the above reasons, defendants’ motion to dismiss the untimely-filed ESOP claims
is granted in part and denied in part, and their motion for summary judgment as to count IV,
ERISA severance pay claim, and to dismiss the remainder of counts IV and V, is granted, The
claims of plaintiffs Armstrong, Duckett, Gillespie, Holder, Lightsey, Mason, McQueen,
Sanders, Smith, D., Smith, J., Walker and Wheeler, made in counts I and III, are dismissed,

but their claims in count I remain. Counts FV and V are dismissed.

JAMES B. MORAN
‘ior Judge, U. S. District Court



>

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION DOCKETED

AMSTED INDUSTRIES, INC., et al.,

IN RE AMSTED INDUSTRIES, INC., ) JUL 1 6 2002
“ERISA” LITIGATION )
) MDL No. 1417
THIS DOCUMENT RELATES TO: )
)
)
JUAN ARMSTRONG, et al., )
)
Plaintiffs, )
)
vs. ) No. 01 C 2963
)
)
)
)

Defendants,

MEMORANDUM OPINION AND ORDER

Non-retiree plaintiffs bring this purported class action against Amsted Industries, Inc.
(Amsted), Amsted Industries, Inc. Employees’ Stock Ownership Plan (ESOP), and various
individual defendants, under the Employee Retirement Income Security Act of 1974 (ERISA),
alleging breach of fiduciary duty, wrongful denial of claims and benefits, unlawful plan
amendments, breach of contract, and conversion. Defendants now move to dismiss untimely
ESOP claims, and move for summary judgment on the ERISA severance pay claim in count
IV and to dismiss the remainder of counts IV and V. For the following reasons, defendants’
motion to dismiss untimely ESOP claims is granted in part and denied in part, and their
motion for summary judgment on the ERISA severance pay claim and to dismiss the state
claims in counts IV and V is granted.

BACKGROUND
Plaintiffs previously filed various individual and collective complaints against

defendants. On August 21, 2001, the Judicial Panel on Multi-District Litigation transferred

ny


No. 01 C 2963 MDL No. 1417 Page 2

these actions for coordinated pretrial hearings to this court. On October 4, 2001, we ordered
the filing of two amended consolidated complaints, one brought by Amsted retirees and the
other brought on behalf of non-retirees. This opinion addresses motions challenging the non-
retiree complaint.

The facts of this case are taken from plaintiffs’ complaint. Allegedly, plaintiffs have
accumulated stock or securities held in the Amsted Incorporated Employees’ Stock Ownership
Plan (ESOP). The ESOP is a benefit plan that annually distributes shares of stock to the
participants’ individual ESOP retirement accounts. The parties agree that the ESOP is an
employee benefit plan as defined by ERISA, 29 U.S.C. § 1002(3).

Plaintiffs claim Amsted management wrongfully reduced the ESOP benefits obtainable
by plan participants; that they objected to these changes and that each filed written claims for
benefits with the administrator of the ESOP. After exhausting their internal administrative
remedies, plaintiffs filed individual complaints against the defendants in federal court. The
ESOP provides that “[iJf a Participant or Beneficiary does elect to challenge the Plan
Administrator’s determination in judicial or administrative proceedings, the action must be
filed within 120 days following the day the Plan Administrator makes a final determination
on the claim,” (ESOP Article 11.8(g)). Three of the plaintiffs, Zepeda, LeCroy, and Marchant,
met the time limit specified in the ESOP, but the remaining twelve individual plaintiffs filed
outside of the ESOP time limit.

Defendants also allegedly breached a contractual promise to provide severance
payments upon their retirement or termination. Under the terms of the Amsted Severance
Allowance Program (Severance Plan), a participating employee receives severance pay if his

employment is terminated, but is not eligible for severance pay if he is laid off. Plaintiffs each