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Barry v. Trustees of the International Association Full-Time Salaried Officers and Employees of Outside Local Unions and District Councils Pension Plan

August 29, 2006

PADDY F. BARRY, PLAINTIFF,
v.
TRUSTEES OF THE INTERNATIONAL ASSOCIATION FULL-TIME SALARIED OFFICERS AND EMPLOYEES OF OUTSIDE LOCAL UNIONS AND DISTRICT COUNSEL'S (IRON WORKERS) PENSION PLAN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

Presently before the court in this suit brought by plaintiff Paddy F. Barry ("Barry") pursuant to the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, are defendant Jacob West's renewed motion to dismiss Counts III and IV of the complaint (or, in the alternative, for summary judgment) and plaintiff's renewed cross-motion for summary judgment on those counts. For the reasons that follow, the Court will deny both motions.

BACKGROUND

A. Factual Background

ULLICO is a private stock company, whose Board of Directors has historically consisted primarily of officers of major unions. See Def.'s Stmt. of Mat. Facts as to Which He Contends There is No Genuine Issue ("Def.'s Stmt.") at 1 ¶ 1. Mr. West served as a director of ULLICO beginning in the mid-1980's. Id. at 2 ¶ 2. During that time, Mr. West purchased stock in ULLICO. Id. at 2 ¶ 3; 3 ¶ 7. The International Association of Full-Timed Salaried Officers and Employees of Outside Local Unions and District Councils Pension Plan (hereinafter "the Plan") is an employee pension benefit plan within the meaning of Section (3)(2) of ERISA. Id. at 2 ¶ 4. Plaintiff is a participant in the Plan. Mr. West served as a trustee of the Plan for roughly 12 years, ending in February 2001. Id. at 2 ¶ 5.

In 1992, while Mr. West was both a Director of ULLICO and a trustee of the Plan, ULLICO offered the Plan, and others, the opportunity to purchase ULLICO Preferred Certificates. Id. at 3 ¶ 6. The Plan's investment manager, Kennedy Associates, invested $2,750,000 of the Plan's money in ULLICO Preferred Certificates, which were later converted to Class A stock. Id.

In 1997, prior to realizing financial success on its investments, ULLICO adopted an eleven-year repurchase program, through which ULLICO each year would repurchase stock from its shareholders. Id. at 4 ¶ 8. Under the repurchase program, ULLICO agreed to repurchase shares up to a maximum aggregate amount. Id. at 4 ¶ 9. If the total amount of tendered shares was more than the maximum agreed to by the directors, certain shareholders would be prorated with respect to the stock repurchases. Id. If a repurchase was oversubscribed, ULLICO would repurchase all shares of those that held less than 10,000 shares, but those with more than 10,000 would be subject to proration. Id. On November 3, 2000, the Board approved a $30 million repurchase program (hereinafter the "formal repurchase program") along the lines of the program that was approved in 1997, but pursuant to which the share price was set at $146.04 and all shareholders owning more than 2% of ULLICO stock had to tender all of their shares if they sought to tender any. Id. at 5 ¶¶ 12. The Plan's new investment manager, Columbia Partners, sought to tender all of the Plan's shares, but because the program was oversubscribed, the repurchase was prorated and ULLICO only repurchased 2,421 of the Plan's shares. Id. at 5 ¶ 13.

In addition to the formal repurchase program, the Board voted to approve a resolution introduced by Chairman Georgine at the November 3, 2000 meeting. Id. at 7 ¶ 21. That resolution established a discretionary repurchase program, which the Chairman stated had been ongoing for quite some time with respect to individual, union, and estate shareholders. See id.; see also Def.'s Exh. 12 at 5. The Chairman introduced the resolution by stating that he had decided "it would be good to have the Board's confirmation of [his] authority" in this regard. Def.'s Exh. 12 at 5. The resolution itself, however, did not limit its terms to certain classes of shareholders other than to state generally that shareholders of Class A, Class B, or Capital Stock would be eligible to benefit. Def.'s Exh. 12 at 5. Under the terms of the resolution, the Chairman was given the authority to make discretionary repurchases from such shareholders "in his discretion" if he deemed such repurchases to be in ULLICO's best interests and consistent with sound financial practice. Id. The share price for such repurchases was not to exceed $146.04. Id. On November 21, 2000, the Chairman sent a letter to ULLICO's shareholders, including participants in the Plan, which represented that "the Company continues to reserve the right, pursuant to its By-laws, to repurchase shares outside the [formal] Repurchase Program at $25 per share." Pl.'s Exh. 16 at 2.

Between May 10, 2000 and November 2000, West and a number of other directors resold their own capital stock to ULLICO pursuant to the discretionary repurchase program at a share price of $146.04. Def.'s Stmt. at 6 ¶ 18. The majority of West's shares were resold pursuant to a Director/Officer Request for Repurchase Form in early August of 2000.*fn1 Def.'s Stmt. at 6 ¶ 19. The Plan did not participate in the discretionary repurchase program, and West never disclosed to the Plan either the existence of the discretionary repurchase program or his own use of it. Def.'s Resp. Stmt. at 8; Pl.'s Stmt. at 7. Through the discretionary and formal repurchase programs, ULLICO repurchased a total of $44.6 million in company stock between May 2000 and May 2001, all at the $146.04 share price. Def.'s Stmt. at 11 ¶ 29.

B. Procedural Background

Plaintiff Barry filed this action on December 4, 2002 (twice amending his complaint on January 6, 2003 and August 25, 2004) seeking, inter alia, payment to the Plan of all Plan losses and the original named defendants' gains from the sale of ULLICO stock. See Second Am. Compl. (Prayer for Relief). All of the original defendants filed motions to dismiss plaintiff's Second Amended Complaint on a number of grounds. On March 11, 2004, the Court denied West's motion to dismiss, and granted in part the motion to dismiss of the ULLICO defendants, leaving only Count VI remaining against them. The Court held that plaintiff's claim in Count VI against the ULLICO defendants for knowingly participating in fiduciary breaches by West was viable. The Court also granted the motion to dismiss of Joseph J. Hunt, Michael A. Fitzpatrick, and Dennis R. Toney, trustees of the Plan. Over the course of the case, moreover, plaintiff has voluntarily dismissed his action against: Eugene Upshaw; John Wilhelm; Douglas J. McCarron; Frank Hurt; Earl Kruse; Terrence O'Sullivan; Lenore Miller; Moe Biller; Arthur Coia; John T. Joyce; Vincent Sombrotto; and John Barry.

Defendant West and the remaining ULLICO defendants, as well as plaintiff, then moved for summary judgment on all remaining claims. In its Memorandum Opinion of September 20, 2005, the Court granted the defendants' motions and denied plaintiff's motion, finding that:

Plaintiff's action has more to do with corporate misconduct at ULLICO than with West's alleged breach of his fiduciary duties to the Plan. The thrust of plaintiff's evidence in support of his claims is a November 26, 2002 Report of Special Counsel to the ULLICO Board of Directors, which addresses alleged misconduct by ULLICO officials. However, claims of corporate malfeasance are not before the Court, nor could plaintiff pursue such claims here. Rather, plaintiff's only viable action against defendants is for breach of fiduciary duties to the [] Plan. . . . [P]laintiff has failed to establish such claims.

Barry v. Trustees of the International Ass'n of Full-Time Salaried Officers and Employees of Outside Local Unions and District Counsel's (Iron Workers) Pension Plan, 404 F. Supp. 2d 145, 157 (D.D.C. 2005). Thereafter, plaintiff filed a motion for reconsideration, arguing that the Court misapprehended certain facts relating to the discretionary repurchase program. The Court agreed that it may have focused on facts that were more pertinent to the formal, rather than the discretionary, repurchase program, and granted plaintiff's motion. See Barry v. Trustees of the International Ass'n of Full-Time Salaried Officers and Employees of Outside Local Unions and District Counsel's (Iron Workers) Pension ...


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