Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 1 of 17 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA K. WENDELL LEWIS, et al., v. Plaintiffs, PENSION BENEFIT GUARANTYCORPORATION, Defendant. Case No. 1:14-cv-03838-SCJ REPLY OF PENSION BENEFIT GUARANTY CORPORATION TO PLAINTIFFS OPPOSITION TO MOTION TO DISMISS
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 2 of 17 TABLE OF CONTENTS INTRODUCTION... 1 ARGUMENT... 1 I. The Case Should be Dismissed or Transferred to the District of Columbia... 1 II. Discovery is Unnecessary Because Sufficient Facts Exist to Show that the Complaint was not Filed in the Proper Venue... 5 III. The Motion to Dismiss Claim Five Should be Granted Because the Plaintiffs Have an Adequate Remedy to Recover Benefits... 6 CONCLUSION... 10 i
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 3 of 17 Cases TABLE OF AUTHORITIES Connecticut National Bank v. Germain, 503 U.S. 249 (1992... 2 Flowers Industries, Inc. v. FTC, 835 F.2d 775 (11th Cir. 1987... 3 Jones v. American General Life and Accident Insurance Co., 370 F.3d 1065 (11th Cir. 2004... 6, 7 Katz v. Comprehensive Plan of Group Insurance, 197 F.3d 1084 (11th Cir. 1999... 6 KM Enterprises, Inc. v. Global Traffic Technologies, Inc., 725 F.3d 718 (7th Cir. 2013... 3 Korotynska v. Metropolitan Life Insurance Co., 474 F.3d 101 (4th Cir. 2006... 10 Lipofsky v. New York State Workers Compensation Board, 861 F.2d 1257 (11th Cir. 1988... 4 Nolte v. BellSouth Corp., No. 1:06-cv-762-WSD, 2007 WL 120842 (N.D. Ga. Jan. 11, 2007... 10 Ogden v. Blue Bell Creameries U.S.A., Inc., 348 F.3d 1284 (11th Cir. 2003... 6 Rochow v. Life Insurance Company of North America, No. 12-2074, 2015 WL 925794 (6th Cir. Mar. 5, 2015... 7, 8 Stephens v. US Airways Group, 555 F. Supp. 2d 112 (D.D.C. 2008... 10 United States v. Steele, 147 F.3d 1316 (11th Cir. 1998... 2 ii
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 4 of 17 Varity Corp. v. Howe, 516 U.S. 489 (1996... 8 Zalduondo v. Aetna Life Insurance Co., 845 F. Supp. 2d 146 (D.D.C. 2012... 10 U.S. Code 29 U.S.C. 1303(f... 1 Other Authorities USA Jobs, https://www.usajobs.gov... 10 PBGC Annual Report, http://www.pbgc.gov/documents/2014-annual-report.pdf... 10 iii
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 5 of 17 INTRODUCTION Defendant Pension Benefit Guaranty Corporation ( PBGC replies as follows to Plaintiffs Opposition to PBGC s Motion to Dismiss ( Opposition. ARGUMENT I. The Case Should be Dismissed or Transferred to the District of Columbia. The Plaintiffs acknowledge in their Opposition that the Plan has been terminated. The Plaintiffs... are seeking to obtain their rightful share of assets from their terminated pension plan. Opposition at 1. The Plaintiffs also recognize that venue is governed by 29 U.S.C. 1303(f. Opposition at 7. The appropriate court for the venue of an action against PBGC is defined under that section as: (A the United States district court before which proceedings under section 1341 or 1342 are being conducted, (B if no such proceedings are being conducted, the United States district court for the judicial district in which the [pension] plan has its principal office, or (C the United States District Court for the District of Columbia. The parties agree that the first venue provision the district where pension plan termination proceedings are being conducted is inapplicable. But the Plaintiffs contend that the second venue provision is applicable because the Plan s 1
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 6 of 17 principal office was located in Atlanta when the Plan was ongoing, and because PBGC contractors processed benefits and responded to inquiries in a Field Benefits Administration office ( FBA in Atlanta until three months before this lawsuit was filed. 1 They argue that a plan can continue to have a principal office even after it is terminated, so the venue provision s use of the present tense, i.e., the judicial district in which the [pension] plan has its principal office.... (emphasis added does not prevent Atlanta from being an appropriate venue in this case. The Plaintiffs are wrong as a matter of law. [W]e must presume that Congress said what it meant and meant what it said. United States v. Steele, 147 F.3d 1316, 1318 (11th Cir.1998 (en banc (citing Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253 54 (1992. Here, Congress used the present tense has. Accordingly, the location where a plan had its principal office when it was ongoing is not a factor under the venue provision. And the processing of benefits by a PBGC contractor which serves to communicate and implement benefit determinations made by PBGC staff in Washington D.C. cannot establish a 1 Neither PBGC nor any of its contractors have conducted any operations whatsoever in the state of Georgia concerning the terminated Plan, or any other plan, at any time since the Atlanta FBA was closed in August of 2014. See Declaration of Nicole Williams, a copy of which is attached hereto as Exhibit C. 2
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 7 of 17 principal office for a terminated plan. Likewise, the convenience of the forum for one of the parties is not a factor under the statute. 2 In any event, even under the Plaintiffs theory, venue was eliminated when the Atlanta FBA closed in August 2014. That office was established in the 1990s for PBGC contractors to process benefits i.e., issue written correspondence as directed by PBGC staff in Washington, D.C., and handle inquiries from participants under numerous terminated plans, not just this Plan. See Declaration of Nicole Williams. PBGC s most recent contractor maintaining the Atlanta FBA ceased processing benefits and responding to inquiries as of August 20, 2014, and PBGC has had no contractors in the state of Georgia for this Plan or any other plan since that time. See Declaration of Nicole Williams. Plaintiffs declarations are consistent with this fact; one addresses communications with the FBA until 2012, and one asserts that in 2015, the Atlanta FBA responsibilities were transferred to Florida. Consequently, there can be no doubt, even under the Plaintiffs interpretation, that neither the Plan nor PBGC had any office, of any kind, in 2 The case Plaintiffs cite at Opp. 12, KM Enters. v. Global Traffic Techs. Inc., 725 F.3d 718, 724 (7th Cir. 2013, holds that venue must be fair and reasonably convenient to defendants, not plaintiffs. 3
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 8 of 17 Georgia at the time the Complaint was filed, which is the dispositive date. 3 Thus, only the third venue provision, the District of Columbia, is applicable. Moreover, even for the period prior to PBGC s closure of the Atlanta FBA, Atlanta never served as the principal office of PBGC in determining benefits under the Plan. The Atlanta FBA operated through a contract with PBGC and was not permitted to determine the eligibility for benefits of a participant of the Plan or to determine the amount of benefits owed. As is the case for all terminated plans, all determinations concerning benefit eligibility and benefit amounts for the participants of the Plan were made by PBGC in Washington, D.C. See Declaration of Nicole Williams. Plaintiffs state that PBGC has, in other cases, conceded that a terminated plan can have a principal office outside of Washington DC. Opposition at 14. PBGC has not moved to dismiss every suit filed outside the District of Columbia for improper venue, nor need the agency do so. Choosing not to raise the defense of improper venue in a given lawsuit does not mean that PBGC conceded that venue was proper. Lack of personal jurisdiction and improper venue... are waivable defects. Both defenses are waived when a defendant files a responsive pleading or Rule 12 motion failing to assert them. Lipofsky v. New York State 3 See Flowers Indus., Inc. v. FTC, 835 F.2d 775, 776 n.1 (11th Cir. 1987 ( venue must be determined based on the facts at the time of filing. 4
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 9 of 17 Workers Comp. Bd., 861 F.2d 1257, 1258 (11th Cir. 1988(citations omitted (emphasis added. In the cases Plaintiffs cite, PBGC exercised its litigation judgment as a defendant in deciding whether to assert the defense. The facts and circumstances, and the availability of agency resources, determine PBGC s litigation strategy in each case. Here, PBGC has asserted the defense and dismissal or transfer of the case is warranted. II. Discovery is Unnecessary Because Sufficient Facts Exist to Show that the Complaint was not Filed in the Proper Venue. It is undisputed that the Plan was terminated on September 2, 2006. See Doc. 13-2, Trusteeship Agreement at 2. It is also undisputed that when the Plaintiffs filed their Complaint on December 2, 2014, there were no ongoing FBA operations in Georgia related to the terminated Plan, and no such operations have been resumed since that time. See Declaration of Nicole Williams. Plaintiffs have not asserted and would be unable to assert facts to dispute this. Consequently, the Northern District of Georgia is not the proper venue. Because the only proper basis for venue for a terminated plan is the District of Columbia, discovery would be wasteful. Even accepting Plaintiffs strained construction of the statute that a contractor s office in Atlanta could somehow provide venue, the undisputed closure of the Atlanta FBA in August 2014 necessitates deciding this motion now without discovery. The Court should transfer the case to the District of Columbia, or dismiss the case. 5
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 10 of 17 III. The Motion to Dismiss Claim Five Should be Granted Because the Plaintiffs Have an Adequate Remedy to Recover Benefits. A claim for fiduciary breach is not allowed where the plaintiff has an adequate remedy for the recovery of benefits. See PBGC Memo of Law at 9-11. Plaintiffs reliance on Jones v. Am. Gen. Life & Accident Ins. Co., 370 F.3d 1065 (11th Cir. 2004 is misplaced because in that case the plaintiff did not have a remedy for benefits. The plaintiffs in Jones assumed for purposes of their fiduciary breach claim that they were not entitled to benefits under the subject welfare benefit plan. And the court found that the plaintiffs had to rely on the ERISA provision allowing equitable relief or they would have no remedy at all. Id. at 1074. [P]articipants in an ERISA-governed plan that rely to their detriment on a fiduciary s misrepresentations of the plan s terms may state a claim for appropriate equitable relief under Section 502(a(3 if they have no adequate remedy elsewhere in ERISA s statutory framework. Id. Here, Plaintiffs assert in the Complaint that they are entitled to additional benefits. If they are successful in Claims One through Four, they can recover the full amount of the benefits that they contend are due to them. They cannot, however, pursue a duplicative claim for fiduciary breach. See, e.g., Ogden v. Blue Bell Creameries U.S.A., Inc., 348 F.3d 1284, 1286-87 (11th Cir. 2003 (beneficiary 6
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 11 of 17 could not seek equitable relief where she had an adequate remedy available to recover benefits due under the terms of the plan; Katz v. Comprehensive Plan of Grp. Ins., 197 F.3d 1084, 1088-89, (11th Cir. 1999 (same; cf. Jones, 370 F3d at 1074 (declining to extend Katz to cases where the plaintiff would be left without a remedy. Plaintiffs attempt to get around this established precedent by asserting that [i]n Claim Five [they] seek an entirely different form of relief, namely the profit that the PBGC reaped by breaching its fiduciary duties of loyalty and prudence. Opposition at 23 (emphasis omitted. The court rejected just such an approach to circumvent the prohibition against claims for equitable remedies duplicative of benefit claims in Rochow v. Life Insurance Company of North America, No. 12-2074, 2015 WL 925794 (6th Cir. Mar. 5, 2015. In Rochow, as in the present case, the plaintiff sought both benefits and disgorgement of profits based on an alleged fiduciary breach. The Court found that: [the plaintiff] is made whole under 502(a(1(B through recovery of his disability benefits and attorney s fees, and potential recovery of prejudgment interest.... Allowing Rochow to recover disgorged profits under 502(a(3, in addition to his recovery under 502(a(1(B, based on the claim that the wrongful denial of benefits also constituted a breach of fiduciary duty, would absent a showing that the 502(a(1(B remedy is inadequate result in an impermissible duplicative recovery, contrary to clear Supreme Court and Sixth Circuit precedent. Id. at *4. 7
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 12 of 17 The Court went on to say that: ERISA remedies are concerned with the adequacy of relief to redress the claimant s injury, not the nature of the defendant s wrongdoing. Id. at *5 (citing Varity Corp. v. Howe, 516 U.S. 489, 515 (1996. In a last-ditch effort to avoid this well-established law, Plaintiffs allege that they suffered two distinct injuries, the denial of benefits due Plaintiffs and an ongoing injury to the Plan and its participants.... Opposition at 23. But there is no statement in Claim Five or anywhere in the Complaint that Plaintiffs are bringing a claim on behalf of the Plan as a whole. Similarly, there is no allegation of an injury to the Plan or to any participants other than the Plaintiffs themselves. Rather, the only alleged injury is that Plaintiffs have not received the amount of benefits to which they are entitled. The claim that PBGC has been unjustly enriched rests on this same alleged injury, for which they have a remedy under their benefit claims. Paragraph 1 of the Complaint states that the lawsuit is an action for equitable and associated declaratory relief by [Plaintiffs] to obtain their rightful share of assets from their terminated pension plan. (emphasis added. Claim Five does not request a different form of relief, or relief for the Plan or other participants. The disgorgement that Plaintiffs seek in Claim Five is to remedy the alleged unjustly earned massive investment returns that PBGC earned off of assets that should have been timely allocated to Plaintiffs. Complaint 146 8
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 13 of 17 (emphasis added. Paragraph 143 alleges that PBGC refused for over a year to provide Plaintiffs basic information about their pension benefits.... (emphasis added. And Paragraph 144 refers to PBGC s delays in providing these same Appellants with the information necessary for an informed appeal. 4 The only difference between Claims One through Four and Claim Five is that Claim Five treats PBGC s alleged actions as a breach of fiduciary duty in three ways. Opposition at 21-22. But these three breaches are all based on the same alleged misallocation of assets, stated in different ways. For example, Paragraph 145 of the Complaint uses the word manipulated to describe PBGC s alleged errors in allocating of assets. And Plaintiffs assert that PBGC s alleged prolonging of the appeals process through delays and information stone-walling hurt them by obscuring both the errors underlying the PBGC s determinations, and the unjust enrichment the PBGC has enjoyed as a consequence of its fiduciary breaches. Complaint 145. Regardless of the number of alleged breaches that Plaintiffs combine under Claim Five, the Claim asserts the same injury allegedly suffered by Plaintiffs as does Claims One through Four. They seek the allocation of additional assets to their benefits, which would result in increased benefits. Claim Five should be 4 The Plaintiffs emphasize in their Opposition that these allegations apply to every Plaintiff. (emphasis in original Opposition at 22. 9
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 14 of 17 dismissed because the Plaintiffs have an adequate remedy for this alleged injury under Claims One through Four. 5 Despite the Plaintiffs contention that dismissal of Claim Five at this stage is premature, courts routinely dismiss duplicative claims for fiduciary breach based on the pleadings. See Zalduondo v. Aetna Life Ins. Co., 845 F. Supp. 2d 146, 155 (D.D.C. 2012 ( [D]etermination of adequacy must be made based upon the allegations in the complaint, and not upon the merits outcome of particular claims. ; see also Korotynska v. Metro. Life Ins. Co., 474 F.3d 101 (4th Cir. 2006; Stephens v. US Airways Group, 555 F. Supp. 2d 112 (D.D.C. 2008; Nolte v. BellSouth Corp., No. 1:06-cv-762-WSD, 2007 WL 120842 (N.D. Ga. Jan. 11, 2007. CONCLUSION The Court should dismiss the Complaint for improper venue, or in the alternative, transfer the case to the U.S. District Court for the District of Columbia. If the Court transfers the case to the District of Columbia, then the District Court there should rule on whether Claim Five should be dismissed. In the event this 5 Plaintiffs assertion that PBGC is made up of human beings [who] clearly benefit from PBGC s investment returns (Opp. at 25 is as perplexing as it is inaccurate. PBGC employees receive the same government scale ( GS salaries regardless of the agency s investment returns, and PBGC s multi-billion dollar deficit is a matter of public record. See USA Jobs https://www.usajobs.gov.; 2014 PBGC Annual Report at 20, http://www.pbgc.gov/documents/2014-annualreport.pdf. 10
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 15 of 17 Court neither dismisses nor transfers the case for improper venue, it should dismiss Claim Five for failure to state a claim upon which relief can be granted. Certification pursuant to LR 7.1 D Counsel certifies that this brief has been prepared with one of the font and point selections approved by the court in LR 5.1C. Dated: March 19, 2015 Office of the Chief Counsel ISRAEL GOLDOWITZ Chief Counsel CHARLES L. FINKE Deputy Chief Counsel JOSEPH M. KRETTEK PAULA J. CONNELLY ANDREA WONG Assistant Chief Counsels FRANK ANDERSON Attorney Respectfully submitted, /s/ Mark R. Snyder Office of the General Counsel JUDITH R. STARR General Counsel PHILIP R. HERTZ Deputy General Counsel KENNETH J. COOPER Assistant General Counsel MARK R. SNYDER Attorney PENSION BENEFIT GUARANTY CORPORATION 1200 K Street, N.W. Washington, D.C. 20005 Tel: (202 326-4400 ext. 3423 Facsimile: (202 326-4112 snyder.mark@pbgc.gov Attorneys for Defendant Pension Benefit Guaranty Corporation 11
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 16 of 17 Local Counsel: LORI M. BERANEK Assistant U.S. Attorney 600 U.S. Courthouse 75 Spring Street, S.W. Atlanta, GA 30303 Tel: (404 581-6050 Lori.beranek@usdoj.gov 12
Case 1:14-cv-03838-SCJ Document 16 Filed 03/19/15 Page 17 of 17 CERTIFICATE OF SERVICE I, Mark R. Snyder, certify that on March 19, 2015, Pension Benefit Guaranty Corporation s Reply to Plaintiff s Opposition to Motion to Dismiss was electronically served by the Court s CM/ECF system which will automatically send email notification of such filing to the following attorneys of record: Roy E. Barnes John Raymond Bevis James Cameron Tribble The Barnes Law Group, LLC 31 Atlanta Street Marietta, GA 30060 Michael N. Khalil Timothy P. O'Toole Miller & Chevalier Chartered Suite 900 655 Fifteenth Street, NW Washington, DC 20005 /s/ Mark R. Snyder Mark R. Snyder 13
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