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William S. Harris, et al v. James E. Koenig

October 3, 2011

WILLIAM S. HARRIS, ET AL., PLAINTIFFS,
v.
JAMES E. KOENIG, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Gladys Kessler United States District Judge

MEMORANDUM OPINION

Plaintiffs William S. Harris, Reginald E. Howard, and Peter M. Thornton, Sr. are former employees of Waste Management Holdings, Inc. ("Old Waste") and participants in the Waste Management Profit Sharing and Savings Plan ("Old Waste Plan" or "Plan"). They bring this action on behalf of the Plan's approximately 30,000 participants under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001, et seq., against Defendants,*fn1 all of whom were fiduciaries of the Old Waste Plan*fn2 or of its successor plan, the Waste Management Retirement Savings Plan ("New Waste Plan").*fn3

This matter is presently before the Court on the Waste Management Defendants'*fn4 Motion for Summary Judgment Based on the Statute of Limitations ("WM Mot.") [Dkt. No. 446], Defendants Koenig and Tobecksen's Motion for Summary Judgment ("Koenig Mot.") [Dkt. No. 439], and Plaintiffs' Cross Motion on Statute of Limitations and Release and in Opposition to Defendants' Motions for Summary Judgment on These Defenses ("Pls.' Mot.") [Dkt. No. 471-1]. Upon consideration of the Motions, Oppositions, Replies, and the entire record herein, the Court concludes that Defendants' Motions for summary judgment are granted in part and denied in part. Plaintiffs' summary judgment Motion is denied.

I. Background*fn5

This action arises from Old Waste's announcement on February 24, 1998, that it had materially overstated its reported income by approximately $1.3 billion prior to 1992 and continuing through the first three quarters of 1997, and that it was therefore restating several of its financial statements for periods between 1991 and 1997. That announcement led to the filing of a securities class action in the United States District Court for the Northern District of Illinois, which settled on September 17, 1999 ("Illinois Litigation").*fn6 Under the terms of the settlement ("Illinois Settlement"), Old Waste and its agents were released from liability for any claims--including unknown claims--brought by members of the Illinois Settlement Class in exchange for $220 million, of which the New Waste Plan recovered $86,609.76. In 1999, New Waste announced further after-tax charges and adjustments of $1.23 billion. That announcement led to the filing of additional securities class action complaints against New Waste and certain of its officers and directors in the Southern District of Texas, which settled on April 29, 2002 ("Texas Litigation"). Both settlements included the Plan and its fiduciaries within the scope of the class.

On April 1, 2002, Plaintiffs filed suit in this Court, alleging ten counts of ERISA violations pursuant to ERISA § 502(a)(2), codified as 29 U.S.C. § 1132(a)(2).*fn7 Plaintiffs' claims were originally divided into three periods. First, Plaintiffs alleged five ERISA violations related to the Plan's purchase of inflated shares of Company Stock in the first claim period between January 1, 1990, and February 24, 1998 (Counts I-V, the "First Period Claims"). Second, Plaintiffs alleged four ERISA violations related to the release of claims by the Plan's fiduciaries in the Illinois Litigation in the second claim period between July 15, 1999, and December 1, 1999 (Counts VI-IX, the "Second Period Claims"). Third, Plaintiffs alleged one ERISA violation related to the release of claims by the New Waste Plan's Trustee--Defendant State Street*fn8 ---in the Texas Litigation in the third claim period between February 7, 2002, and July 15, 2002 (Count X).

On March 12, 2009, this Court dismissed Counts I-V as time-barred under ERISA § 413 because Plaintiffs had "actual knowledge of the breach or violation" more than three years before filing the original Complaint. Harris v. Koenig, 602 F. Supp. 2d 39, 52 (D.D.C. 2009) ("Harris I"). At that time and based on the allegations contained in the Third Amended Complaint, the Court also rejected Plaintiffs' argument that the three-year limitation period should be tolled under the statute's fraudulent concealment provision, finding that Defendants' failure to disclose material information did not constitute an act of concealment under ERISA. Id. at 52-53.

On December 14, 2009, Plaintiffs were granted leave to file a Substitute Fourth Amended Complaint ("4th Am. Compl.") [Dkt. No. 280]. Harris v. Koenig, 673 F. Supp. 2d 8, 14-15 (D.D.C. 2009) ("Harris II"). In their Fourth Amended Complaint, Plaintiffs amended Counts I-V to include new allegations which would establish fraudulent concealment--namely, that certain Old Waste Plan fiduciaries "fraudulently misstated, or caused to be fraudulently misstated, material financial information contained in disclosures required by ERISA and the 1934 Act." 4th Am. Compl. ¶ 79. Plaintiffs also added Counts XIII and XIV, which alleged Defendant State Street's violation of ERISA § 406(b)(2) in the Illinois and Texas Litigations.*fn9

On January 15, 2010, the following Motions to Dismiss were filed by Defendants pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6): (1) the Waste Management Defendants' Motion to Dismiss Counts I-V and Counts VII-IX [Dkt. No. 294]; (2) the Individual Waste Management Defendants'*fn10 Motion to Dismiss Counts I-V [Dkt. No. 291]; and (3) Defendant State Street's Motion to Dismiss Counts XIII and XIV [Dkt. No. 292]. On June 10, 2010, the Court denied the Waste Management Defendants' Motion to Dismiss Counts I-V and VII-IX, and granted in part and denied in part the Individual Waste Defendants' Motion to Dismiss.*fn11 Harris v. Koenig, 722 F. Supp. 2d 44, 64-65 (D.D.C. 2010) ("Harris III"). Defendant State Street's Motion to Dismiss was granted with respect to Counts XIII and XIV. Id.

On November 12, 2010, Plaintiffs filed a Fifth Amended Complaint ("FAC"). In this Complaint, Plaintiffs withdrew Count X on the basis that the evidence obtained in discovery was insufficient to prove the claim. The Fifth--and final--Amended Complaint now includes the following claims.

In the first claim period, January 1, 1990, to February 24, 1998, Count I alleges that the Old Waste Investment Committee and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA § 404 by failing to prudently manage the assets of the Plan; Count II alleges that the Old Waste Administrative Committee and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA § 404 by failing to provide complete and accurate information to Plan participants and beneficiaries; Count III alleges that Old Waste, the Old Waste Administrative Committee, the Old Waste Investment Committee, and any remaining Individual Defendants who are or were members of those Committees engaged in prohibited exchanges of stock between the Plan and Old Waste in violation of ERISA § 406(a)(1)(A); Count IV alleges that Old Waste, its Board of Directors, and any remaining Individual Defendants on the Old Waste Board breached their fiduciary duties under ERISA § 404 by failing to monitor the fiduciaries of the Plan; and Count V alleges that all Old Waste Fiduciaries breached their fiduciary duties under ERISA § 405(a)(2) and (3) by enabling their co-fiduciaries to commit the ERISA violations in Counts I-IV, and by failing to remedy them.

In the second claim period, July 15, 1999, to December 1, 1999, Count VI alleges that Defendant State Street breached its fiduciary duty under ERISA § 404 by failing to adequately investigate and preserve the claims in Counts I-V in the Illinois Litigation and by causing the claims to be released; Count VII alleges that Old Waste and State Street engaged in prohibited exchanges of choses in action between the New Waste Plan and Old Waste in violation of ERISA § 406(a)(1)(A) by releasing claims in the Illinois Litigation; Count VIII alleges that the New Waste Investment Committee and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA § 404 by failing to adequately monitor State Street's performance in the Illinois Litigation; and Count IX alleges that State Street, Old Waste, the New Waste Investment Committee, and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA § 405(a)(2) and (a)(3) by enabling their co-fiduciaries to commit the ERISA violations described in Counts VI-VIII, and by failing to remedy them.

On March 30, 2011, the Waste Management Defendants filed their pending Motion for Summary Judgment Based on the Statute of Limitations, and Defendants Koenig and Tobecksen filed their pending Motion for Summary Judgment.*fn12 On May 2, 2011, Plaintiffs filed their Cross Motion for Summary Judgment on Statute of Limitations and Release and in Opposition to Defendants' Motions for Summary Judgment on These Defenses.*fn13 On June 8, 2011, the Waste Management Defendants filed their Reply in Support of Their Motion for Summary Judgment ("WM Reply") [Dkt. No. 511] and their Opposition to Plaintiffs' Cross-Motion for Summary Judgment ("WM Opp'n") [Dkt. No. 508]. Defendants Koenig and Tobecksen also filed their Opposition to Plaintiffs' Cross Motion for Summary Judgment and Reply in Support of Their Motion for Summary Judgment on June 8, 2011 ("Koenig Reply") [Dkt. No. 509]. On June 30, 2011, Plaintiffs filed their Reply to Defendants Koenig and Tobecksen's Response in Opposition to Plaintiffs' Cross Motion for Summary Judgment on Release [Dkt. No. 532]. On August 15, 2011, Plaintiffs filed a Reply to Oppositions of Defendants James E. Koenig and Bruce D. Tobecksen and of Waste Management Defendants to Plaintiffs' Cross Motion for Summary Judgment on Statute of Limitations ("Pls.' Reply on SoL") [Dkt. No. 552].

II. Standard of Review

Summary judgment may be granted "only if" the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c), as amended Dec. 1, 2007; Arrington v. United States, 473 F.3d 329, 333 (D.C. Cir. 2006). In other words, the moving party must satisfy two requirements: first, that there is no "genuine" factual dispute and, second, if there is, that it is "material" to the case. "A dispute over a material fact is 'genuine' if 'the evidence is such that a reasonable jury could return a verdict for the non-moving party.'" Arrington, 473 F.3d at 333 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A fact is "material" if it might affect the outcome of the case under the substantive governing law. Liberty Lobby, 477 U.S. at 248.

As the Supreme Court stated in Celotex Corp. v. Catrett, "the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." 477 U.S. 317, 322 (1986). The Supreme Court has further explained, [a]s we have emphasized, "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S. Ct. 1348, 89 L.Ed.2d 538 . . . (1986) (footnote omitted). "'[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.'"

Scott v. Harris, 550 U.S. 372, 380 (2007) (quoting Liberty Lobby, 477 U.S. at 247-48) (emphasis in original).

However, the Supreme Court has also consistently emphasized that "at the summary judgment stage, the judge's function is not . . . to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial." Liberty Lobby, 477 U.S. at 249. In both Liberty Lobby and Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150 (2000), the Supreme Court cautioned that "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate ...


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