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Boris Goldenberg, et al v. Indel

June 27, 2012

BORIS GOLDENBERG, ET AL., PLAINTIFFS,
v.
INDEL, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Jerome B. Simandle

OPINION

SIMANDLE, Chief Judge:

I. INTRODUCTION

This putative class action is before the Court on cross motions for partial summary judgment. [Docket Items 119 & 133.] Plaintiffs in this action seek to represent a class of individuals who are or were participants in a pension plan known as the Inductotherm Companies Master Profit Sharing Plan ("Plan"), seeking relief under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 - § 1461. Plaintiffs have sued, among others, the administrators and trustees of the Plan (the "Inductotherm Defendants"), the financial advisers of the Plan, (the "FSC Defendants"), and the "SunAmerica Defendants" who are related to the SunAmerica Money Market Fund ("SAMMF") in which Plan assets were invested. At issue in the instant cross motions are Plaintiffs' claims to recover fees paid to the FSC/SunAmerica Defendants when the Plan assets were invested in the SAMMF.

The Defendants' motion for summary judgment [Docket Item 119] is brought by both the FSC Defendants and the SunAmerica Defendants (hereafter, the "FSC/SunAmerica Defendants" or "Defendants"); Defendants seek summary judgment as to those claims for recovery or disgorgement of all management or investment fees in Counts III and XI (and those portions of Counts V and VI that seek disgorgement of fees) of the First Amended Complaint.*fn1 Defendants claim that these counts have been rendered moot by the fact that Defendants have returned to the Plan all fees, and interest on such fees, that are sought by Plaintiffs in the identified Counts.

Plaintiffs, in addition to filing opposition to Defendants' motion, filed a cross motion for summary judgment as to the same counts. [Docket Item 133.] Plaintiffs contend that no material dispute of fact exists as to Defendants' liability on these counts.

The principal issues raised by these cross motions are (1) whether Plaintiffs have requested any further relief under the identified Counts beyond what they have already recovered after Defendants returned all identified fees and interest to the Plan, and (2) if not, whether Plaintiffs' pursuit of attorneys fees saves such counts from mootness. As explained below, because the Court concludes that Defendants have already provided Plaintiffs with all the relief they have requested under the identified Counts, the Counts must be dismissed as moot, notwithstanding their pursuit of attorneys fees which they may still pursue for these Counts pursuant to 29 U.S.C. § 1132(g). Consequently, the Court will grant Defendants' motion for partial summary judgment and deny Plaintiffs' cross motion as moot.

II. BACKGROUND

The Court has previously discussed the factual and procedural background of this action in great detail in its prior September 17, 2010, Opinion and Order granting in part and denying in part three motions to dismiss. Goldenberg v. Indel, Inc., 741 F. Supp. 2d 618 (D.N.J. 2010) [Docket Items 55 & 56]. In brief, Plaintiffs' First Amended Complaint alleged a complicated scheme of mismanagement and self-dealing by all Defendants; it pursued relief through 22 Counts, most raising claims under ERISA. In its September 17, 2010, Order, the Court dismissed all but seven Counts, all of which alleged claims under ERISA.*fn2 Specifically at issue in the instant cross motions are Counts III, V, VI, and XI.

Plaintiffs allege in Count III that the FSC Defendants engaged in a prohibited transaction pursuant to ERISA § 406(b), 29 U.S.C. § 1106(b), by investing approximately $8 million of Plan assets, previously invested in a Vanguard Money Market Fund, in the SAMMF which resulted in higher management fees being charged to the Plan and in various fees being paid from some SunAmerica Defendants to the FSC Defendants. First Amended Complaint ("FAC") Count III ¶ 7-14. Plaintiffs allege that, as a result, the Plan has paid fees prohibited by ERISA as the investment of the Plan assets in the SAMMF is a prohibited transaction under § 1106(b). Id. ¶ 15. Plaintiffs seek the return of all such fees. FAC Prayer for Relief ¶ C.

In Count XI, Plaintiffs seek disgorgement of the profits of the SunAmerica Defendants that they made from the Plan's investment in the SAMMF. FAC Count XI ¶¶ 4-6; Prayer for Relief ¶¶ D-E.

In Counts V and VI, Plaintiffs allege that the FSC Defendants breached their fiduciary duties of prudence and loyalty by deciding to invest the Plan's assets in the SAMMF. FAC Counts V & VI. Plaintiffs seek damages in the form of losses the Plan suffered as a result of the payment of fees and inferior performance. Count V ¶¶ 13-14; Count VI ¶¶ 4-5.

In March of 2011, the FSC/SunAmerica Defendants reimbursed the Plan in an amount calculated to equal the total amount of fees paid by the Plan to any FSC/SunAmerica Defendant as a result of investing Plan assets in the SAMMF. Defs.' Statement of Uncontested Facts ¶¶ 18, 23-24. The amount credited to the Plan amounted to approximately $47,000 in fees and approximately $10,000 in interest, totaling approximately $57,000 credited to the plan in March of 2011. Id. at ¶¶ 22-24. Additionally, at the end of March, 2011, the FSC/SunAmerica Defendants transferred all Plan assets out of the SAMMF and into a money market fund that is not affiliated with the FSC/SunAmerica Defendants, the Dreyfus Cash Management Fund. Schlueter Second Decl. ¶ 2, attached at Ex. B. to Sawicki Decl, Docket Item 144. The FSC/SunAmerica Defendants receive no fees, revenue sharing payments, or kickbacks, from Dreyfus for investing the Plan Assets in the Dreyfus Cash Management Fund. Id. ¶¶ 3-5. The FSC/SunAmerica Defendants have further taken steps to ensure that no Plan assets will, in the future, be invested in the SAMMF or other account that may result in fees being paid to any FSC/SunAmerica Defendant. Schlueter Decl. ¶ 8, attached at Ex. 5 to Defendants' Statement of Undisputed Facts. These steps included reprogramming FSC's account management system to ensure that the funds would not be reinvested in the SAMMF by mistake. Id.

III. DISCUSSION

A. Standard

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is "material" only if it might affect the outcome of the suit under the applicable rule of law. Id. Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment. Id.

The summary judgment standard does not change when the parties have filed cross-motions for summary judgment. See Appelmans v. City of Phila., 826 F.2d 214, 216 (3d Cir. 1987). Cross-motions for summary judgment: are no more than a claim by each side that it alone is entitled to summary judgment, and the making of such inherently contradictory claims does not constitute an agreement that if one is rejected the other is necessarily justified or that the losing party waives judicial consideration and determination whether genuine issues of material fact exist.

Transportes Ferreos de Venezuela II CA v. NKK Corp., 239 F.3d 555, 560 (3d Cir. 2001) (citing Rains v. Cascade Indus., Inc., 402 F.2d 241, 245 (3d Cir. 1968)). If review of cross-motions for summary judgment reveals no genuine issue of material fact, then judgment may be entered in favor of the party deserving of judgment in light of the law and undisputed facts. See Iberia Foods Corp. v. Romeo Jr., 150 F.3d 298, 302 (3d Cir. 1998) (citing Ciarlante v. Brown & Williamson Tobacco Corp., 143 F.3d 139, 145-46 (3d Cir. 1988)).

B. Analysis

1) Mootness of Claims for Retroactive Forms of Relief Defendants argue that specific claims of the Plaintiffs are moot. In particular, Defendants seek to have dismissed only Plaintiffs' claims seeking the retroactive relief of recovering or disgorging management fees paid to the FSC/SunAmerica Defendants as a result of the Plan's assets being invested in the SAMMF. This implicates Counts III and XI in their entirety and Counts V and VI to the extent that they seek disgorgement of fees. Thus, Defendants are seeking to dismiss only Counts, or portions of Counts, that pursue retroactive relief. Plaintiffs do not seek the entry of any prospective relief through these Counts. Plaintiffs do, of course, seek the entry of several injunctions with regard to the management of the Plan,*fn3 but those claims for prospective, ...


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