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BELL v. EXECUTIVE COMMITTEE OF THE UFCW PENSION PLAN

January 30, 2002

NORMAN BELL, ET AL., PLAINTIFFS,
V.
EXECUTIVE COMMITTEE OF THE UNITED FOOD AND COMMERCIAL WORKERS PENSION PLAN FOR EMPLOYEES, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Ellen Segal Huvelle, United States District Judge.

MEMORANDUM OPINION

On October 12, 2001, plaintiffs served a proposed amended complaint in this action, which arises under section 409 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1109. Plaintiffs amended their complaint to add three individual defendants — John Statts, Thomas Shanklin, and James Catington — each of whom was an officer and employee of defendant Investment Performance Services, LLP ("IPS") at all times relevant to the action. IPS and the three individual defendants have moved pursuant to Fed.R.Civ.P. 12(b)(6), 12(f), 15(a), and 56(b) to strike the amended complaint, to dismiss the claims against the individual defendants, or for summary judgment with respect to those counts. In response, plaintiffs have moved pursuant to Fed.R.Civ.P. 15(a) and 56(f) for leave to refile the amended complaint nunc pro tunc and for an order continuing or denying defendants' motion for summary judgment.*fn1 Upon consideration of the pleadings and the entire record before it, the Court finds that the complaint was properly amended, and that resolution of the claims against the individual defendants is inappropriate at this early stage. The Court will therefore deny defendants' motions to strike and dismiss, and will deny as moot plaintiff's motion for leave to refile the amended complaint.

BACKGROUND

The UFCW Pension Plan for Employees (the "Plan") serves officers and staff of the UFCW, and has more than 6,000 participants and beneficiaries. (First Amended Complaint ¶ 43.)*fn2 This action arises out of the decision of the UFCW Pension Plan Executive Committee to approve an options-based hedge strategy as an investment approach for the Plan in August 1998, which plaintiffs allege led to losses of approximately $37 million. (First Amended Complaint ¶ 40.)

In November 2000, the Trustees filed Executive Committee of the UFCW Pension Plan for Employees, et al. v. Investment Performance Services, Inc., et al., No. 00-2788 ("Executive Committee"), under § 502(a)(2) of ERISA, 29 U.S.C. § 1132(a)(2). The complaint in Executive Committee is premised on the belief that the hedge program was conceptually a prudent investment strategy for the Plan, but that Clifton Group Investment Management Company ("Clifton") and IPS, the Plan's investment consultant, breached their fiduciary duty to the Plan in the implementation of the hedge program.*fn3 The Executive Committee plaintiffs seek recovery for the Plan under 29 U.S.C. § 1132(a)(2).

In response, IPS and Clifton filed cross-claims against the Trustees under the theory that if the hedge program were imprudent, the Trustees themselves are liable to the Plan for the losses under § 409 of ERISA, which holds Trustees personally liable for any breach of fiduciary duty.*fn4 29 U.S.C. § 1109.

The class action complaint in the instant action was filed in January 2001. The Bell plaintiffs are participants in the Plan, and they argue that the Trustees, in addition to IPS and Clifton, breached their fiduciary duties to the Plan by following the advice of IPS and permitting Clifton to implement the hedge program. As specified by ERISA, the Bell plaintiffs seek the same relief as the Executive Committee plaintiffs — restitution to the Plan for losses caused by the alleged breach of fiduciary duty. 29 U.S.C. § 1109, 1132(a)(2). As with the counterclaims asserted by IPS and Clifton in Executive Committee, any trustee found to have breached his or her fiduciary duty to the Plan in the Bell lawsuit is personally liable for damages.*fn5

Alternatively, they have moved to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6), arguing that plaintiffs have not alleged that Statts, Shanklin, and Catington functioned as fiduciaries under ERISA. Finally, defendants have moved for summary judgment on essentially the same ground.*fn6

LEGAL ANALYSIS

I. Motion To Strike

Defendants first argue that the amended complaint should be stricken because plaintiffs failed to obtain leave of court before filing it. Rule 15(a) of the Federal Rules of Civil Procedure provides that where, as here, responsive pleadings have been filed, a party may amend a pleading "only by leave of court . . . and leave shall be freely given when justice so requires." A complaint is a pleading. Fed.R.Civ.P. 7(a); Adkins v. Safeway, Inc., 985 F.2d 1101, 1102 (D.C. Cir. 1993). The August 12, 2001 Scheduling Order issued by the Court authorized the parties to amend all pleadings by October 15, 2001.*fn7 The first amended complaint was filed and served on October 12, 2001. This Circuit has held that under the liberal standard of Rule 15(a), "it is an abuse of discretion to deny leave to amend unless there is sufficient reason, such as undue delay, bad faith or dilatory motive, repeated failure to cure deficiencies by previous amendments, or futility of amendment." Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996) (internal quotation omitted); see Caribbean Broadcasting System, Ltd. v. Cable & Wireless PLC, 148 F.3d 1080, 1083-84 (D.C. Cir. 1998) (emphasizing Rule 15(a)'s liberal standard). Defendants have offered no real basis to conclude that the amended complaint was served for the purpose of undue delay, in bad faith, because of a dilatory motive, or as a result of a repeated failure to cure previous defects. And, as explained below, plaintiffs' amendments are not futile. Accordingly, plaintiffs' amended complaint is proper under Rule 15(a) and the August 12 Order.

II. Motion To Dismiss

Defendants next argue that the complaint with respect to Statts, Shanklin, and Catlington should be dismissed for failure to state a claim. Defendants contend that plaintiffs have failed to plead that ...


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