Court Opinion

ID: 2975517
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:35:50.57282+00
Date Added: 2024-06-11T13:16:01.403852
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                                     Pursuant to Sixth Circuit Rule 206
                                              File Name: 07a0317p.06

                        UNITED STATES COURT OF APPEALS
                                         FOR THE SIXTH CIRCUIT
                                           _________________

                                                          X
                                                           -
 KERMIT D. BRIDGES, on behalf of himself and a
                                                           -
 class of persons similarly situated and on behalf of
                                                           -
 American Power System Retirement Savings Plan
                                                           -
                                                               No. 06-4100
 (formerly known as the American Electric Power
                                                           ,
 System Employees Savings Plan) and Central and             >
 South West,                                               -
                                    Plaintiff-Appellant, -
                                                           -
                                                           -
                                                           -
             v.
                                                           -
                                                           -
 AMERICAN ELECTRIC POWER COMPANY, INC.,
                                   Defendant-Appellee. -
                                                          N
                           Appeal from the United States District Court
                          for the Southern District of Ohio at Columbus.
                       No. 03-00067—Algenon L. Marbley, District Judge.
                                             Argued: July 27, 2007
                                   Decided and Filed: August 15, 2007
             Before: SILER and COOK, Circuit Judges; and REEVES, District Judge.*
                                              _________________
                                                   COUNSEL
ARGUED: Edwin J. Mills, STULL, STULL & BRODY, New York, New York, for Appellant.
Alvin James McKenna, PORTER, WRIGHT, MORRIS & ARTHUR, Columbus, Ohio, Michael J.
Chepiga, SIMPSON, THACHER & BARTLETT, New York, New York, for Appellee. Robyn M.
Swanson, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Curiae.
ON BRIEF: Edwin J. Mills, STULL, STULL & BRODY, New York, New York, for Appellant.
Alvin James McKenna, Fred G. Pressley, Jr., PORTER, WRIGHT, MORRIS & ARTHUR,
Columbus, Ohio, D. Michael Miller, AMERICAN ELECTRIC POWER SERVICE
CORPORATION, Columbus, Ohio, Michael J. Chepiga, George S. Wang, SIMPSON, THACHER
& BARTLETT, New York, New York, for Appellee. J. Matthew Calloway, UNITED STATES
DEPARTMENT OF LABOR, Washington, D.C., for Amicus Curiae.

         *
          The Honorable Danny C. Reeves, United States District Judge for the Eastern District of Kentucky, sitting by
designation.

                                                          1
No. 06-4100           Bridges v. American Electric Power Co.                                   Page 2

                                        _________________
                                            OPINION
                                        _________________
        COOK, Circuit Judge. Plaintiff Kermit Bridges appeals a district court order denying his
motion for class certification and dismissing his claims without prejudice. We reverse and remand
for further proceedings.
                                                   I
        Plaintiff Kermit Bridges worked for Defendant American Electric Power Company, Inc.
(“AEP”) and participated in the American Electric Power System Retirement Savings Plan (“ Plan”),
a “defined contribution” plan under section 3(34) of the Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. § 1102(34). One of the investments to which Plan participants could allocate
their contributions was the AEP Stock Fund, which consisted almost entirely of AEP stock.
        According to the complaint: (1) between 1998 and 2002, AEP secretly engaged in various
reporting and energy-trading abuses; (2) these practices caused AEP’s stock price to be artificially
inflated; (3) when the market learned of these abuses in 2002, AEP’s stock price dropped
precipitously; and (4) this correspondingly devalued the AEP Stock Fund. In 2003 Bridges brought
an action under ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2), and the court consolidated several
related cases and appointed Bridges lead plaintiff. The complaint alleged that the company breached
its fiduciary duty to Plan participants, ERISA § 404, 29 U.S.C. § 1104, by (1) continuing to offer
the AEP Stock Fund to Plan participants despite knowing that AEP stock was artificially overvalued,
and (2) failing to disclose the alleged abuses to participants so they could make informed investment
decisions.
         AEP moved to dismiss, arguing that Bridges had not complied with Fed. R. Civ. P. 23.1,
which imposes various obligations on the representative plaintiff “[i]n a derivative action brought
by one or more shareholders or members to enforce a right of a corporation.” The district court
denied the motion, reasoning that Rule 23.1 does not apply to this type of action. In re AEP ERISA
Litig., 327 F. Supp. 2d 812, 820–21 (S.D. Ohio 2004). Bridges sold his Plan holdings in 2004. In
2005 Bridges moved for class certification. The district court denied the motion, reasoning that
Bridges lacked standing because he ceased to be a “participant” in the Plan after divesting himself
of his holdings in 2004. See 29 U.S.C. § 1132(a)(2) (establishing that only the Secretary of Labor,
a participant, a beneficiary, or a fiduciary may bring a civil action to enforce a fiduciary’s duties
under 29 U.S.C. § 1109). The district court thus dismissed Bridges’s claims, and Bridges appealed.
                                                  II
        Under ERISA § 404, a fiduciary owes strict duties to a plan and its participants. See 29
U.S.C. § 1104. If a fiduciary breaches these duties, he is personally liable to compensate the plan
for any losses resulting from his breach. 29 U.S.C. § 1109. ERISA § 502(a)(2) provides, however,
that only certain actors may sue a plan fiduciary to enforce these duties: the Secretary of Labor,
participants, beneficiaries, and fiduciaries. 29 U.S.C. § 1132(a)(2). This case turns on whether
Bridges is a “participant” in the Plan, a question of “statutory standing” (not Article III standing).
See, e.g., Coan v. Kaufman, 457 F.3d 250, 256 (2d Cir. 2006) (“Although [courts] have referred to
a plaintiff’s status as a ‘participant’ under ERISA as a question of ‘standing’ . . . it is a statutory
No. 06-4100                Bridges v. American Electric Power Co.                                                  Page 3

requirement, not a constitutional one.”).1 The interpretation of ERISA is a legal question this court
reviews de novo. E.g., Bartling v. Fruehauf Corp., 29 F.3d 1062, 1072 (6th Cir. 1994).
        The parties agree that Bridges had standing until the moment in March 2004 when he
liquidated his Plan holdings. The dispute in this case centers on whether Bridges’s selling of his
holdings extinguishes his “statutory standing” by ending his status as a “participant” in the Plan.
ERISA defines a “participant,” in relevant part, as “any employee or former employee of an
employer . . . who is or may become eligible to receive a benefit of any type from an employee
benefit plan.” ERISA § 3(7), 29 U.S.C. § 1002(7). In Firestone Tire & Rubber Co. v. Bruch, the
Supreme Court construed the statutory term “participant” to mean “employees in, or reasonably
expected to be in, currently covered employment, or former employees who ‘have . . . a reasonable
expectation of returning to covered employment’ or who have ‘a colorable claim’ to vested
benefits.” 489 U.S. 101, 117 (1989) (citations omitted). Thus, as the Seventh Circuit recently
recognized in a virtually identical case that asked whether the term “participant” “include[s] former
employees who have cashed out of their [defined contribution] plan benefits,” “the question comes
down to whether, if the plaintiffs win their case by obtaining a money judgment . . ., the receipt of
that money will constitute the receipt of a plan benefit.” Harzewski v. Guidant Corp., 489 F.3d 799,
804 (7th Cir. 2007). Following the Seventh Circuit’s lead, we answer this question of first
impression, id. at 806, in the affirmative and hold that a former employee like Bridges           has
“participant” standing despite having “cashed out” his defined-contribution plan, id. at 804.2 We
find persuasive that court’s thorough analysis of the statutory standing issue and will not attempt to
improve upon it.3
                                                            III
        AEP also argues that this court could affirm the district court on the independent ground that
Bridges is not an “adequate” class representative. AEP briefed this issue in resisting the motion for
class certification, but the district court ultimately decided the motion on standing grounds. In our
view, the best course is a remand for district court consideration of the question, so that this court
can exercise, if necessary, meaningful abuse-of-discretion review. See Stout v. J.D. Byrider, 228
F.3d 709, 717 (6th Cir. 2000) (reviewing an “adequacy” determination for abuse of discretion).
                                                            IV
         For these reasons, we reverse and remand for further proceedings.

         1
           In general, the Sixth Circuit applies the “zone of interests” test to determine whether a plaintiff has statutory
standing under ERISA. See Astor v. Int’l Bus. Machs. Corp., 7 F.3d 533, 538–39 (6th Cir. 1993) (citing Hughes v. Gen.
Motors Corp., 852 F.2d 568 (6th Cir. 1988) (unpublished)). But Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101
(1989), as we will discuss infra, provides a more specific formulation for cases involving the statutory standing of former
employees. For a discussion of the “zone of interests” test in the context of ERISA “participant” standing, see also
Harzewski v. Guidant Corp., 489 F.3d 799, 803–04 (7th Cir. 2007).
         2
         The Third Circuit recently reached the same conclusion. Graden v. Conexant Sys. Inc., __ F.3d __, 2007 WL
2177170, at *1 (3d Cir. July 31, 2007).
         3
          We share the Seventh Circuit’s frustration with the parties’ excessive citation of non-precedential district-court
cases and acontextual citation of appellate cases. Harzewski, 489 F.3d at 806. In particular, we note that we found none
of the Sixth Circuit cases cited by the parties helpful to resolving this case. These include Morrison v. Marsh &
McLennan Cos., Inc., 439 F.3d 295 (6th Cir. 2006), Swinney v. General Motors Corp., 46 F.3d 512 (6th Cir. 1995),
Brunet v. City of Columbus, 1 F.3d 390, 399 (6th Cir. 1993), Drennan v. Gen. Motors Corp., 977 F.2d 246, 250 (6th Cir.
1992), and Teagardener v. Republic-Franklin Inc. Pension Plan, 909 F.2d 947, 948 (6th Cir. 1990).