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Lively v. Dynegy

February 15, 2006

DENNIS LIVELY, WILLIS HARMS, AND LARRY GRAB, PLAINTIFFS,
v.
DYNEGY, INC., ILLINOIS POWER COMPANY, DYNEGY MIDWEST GENERATION, INC., DYNEGY, INC. BENEFIT PLANS COMMITTEE, LOUIS DOREY, ROBERT D. DOTY, MARIAN M. DAVENPORT, ALEC G. DREYER, JOHN FORD, ANDREA LANG, TOM LINTON, LISA Q. METTS, MICHAEL MOTT, MILTON L. SCOTT, AND R. BLAKE YOUNG, DEFENDANTS.



The opinion of the court was delivered by: Reagan, District Judge

MEMORANDUM AND ORDER ON MOTIONS TO DISMISS UNDER FED. R. CIV. P. 12(B)(6) AND 9(B)

INTRODUCTION

Plaintiffs filed this putative class action requesting relief under ERISA on behalf of all participants (with certain persons excluded from the Class definition) "in the Plan for whose individual accounts the Plan held shares of Dynegy Inc. ("Dynegy") stock at any time from February 1, 2000 to the present." The Plan has both employer and employee contribution features, which permit and require, respectively, investment in Dynegy stock. This employer sponsored retirement plan lost value because Dynegy's stock lost value due to accounting improprieties which are not themselves at issue in this suit. The violations became public in April of 2002 when Dynegy announced that it was under investigation by the SEC. According to the complaint, the value of Dynegy's stock reacted to the disclosure by falling 23%. During the relevant time frame, the complaint pegs the stocks' highwater mark at $54.88 on September 30, 2000; low tide occurred on December 31, 2002 at 47 cents per share. Plaintiffs bring the action under a provision of ERISA allowing plan participants to sue fiduciaries to force them to personally make good any plan losses that resulted from a breach of a fiduciary's duty. 29 U.S.C. §§ 1109(a), 1132(a)(2). Specifically, they allege that the fiduciaries knew that Dynegy's stock value had been inflated and that this placed the value of the benefit plan at risk, but that they did not divest the plan of Dynegy stock. Plaintiffs also allege that the fiduciaries misrepresented the state of the plan to plan participants by making false corporate earnings statements.

Defendants have moved to dismiss the entire case for failure to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6) and also claim the second claim for relief lacks the requisite particularity required of Fed. R. Civ. P. 9(b) when fraud is pled. They assert (1) that suits may only be brought to recover losses to the plan as a whole, and not to individual beneficiaries; (2) that the Dynegy stock contributed is subject to the "settlor doctrine" and is immune from fiduciary challenge; (3) that Plaintiffs have not pled their misrepresentation claim with the particularity required by Fed. R. Civ. P. 9(b) and that corporate misrepresentation is not fiduciary misrepresentation; and (4) that many of the individual Defendants were not fiduciaries of the plan during the applicable time period.

There are two benefit plans at issue, each of which has been the subject of amendment. References to "the Plan" will be made when discussion applies to both instruments and their amendments.

JURISDICTION AND PROCEDURAL HISTORY

Plaintiffs bring their action for declaratory, injunctive, equitable and monetary relief pursuant to ERISA § 502, 29 U.S.C. 1132. This Court enjoys subject matter jurisdiction over plaintiffs' claims under ERISA § 502 (e) and (f), 29 U.S.C. 1132 (e) and (f), and 28 U.S.C. § 1331.

The complaint in this case was filed in this Court on January 31, 2005 against all defendants named in the above style, along with the Dynegy Inc. Benefit Plans Committee which was voluntarily dismissed on June 23, 2005 (Doc. 60). Motions to transfer venue to Texas were filed, briefed and denied on October 31, 2005 (Doc. 90). Oral argument on the motions to dismiss that are the subject of the instant order were held on January 5, 2006.

THE PLAN IN A NUTSHELL

The formal name of the 1997 instrument in issue is the Illinois Power Company Incentive Plan for Employees Covered Under a Collective Bargaining Agreement as Amended and Restated Effective January 1, 1991 and as further Amended through June 1997. The formal name of the 2002 instrument is the Illinois Power Company Incentive Savings Plan for Employees Covered Under a Collective Bargaining Agreement as Amended and Restated Effective January 1, 2002.

The plan is employer sponsored and provides for individual retirement accounts with both employer and employee contribution features, which permit and require, respectively, investment in Dynegy stock.

THE PLAINTIFFS AND THE DEFENDANTS

Plaintiffs Lively, Harm and Grab have each worked for defendant Dynegy or its predecessors for more than 30 years. As a result of this employment, each participates in the Plan, which is a "defined contribution" or "individual account" pension plan. Plaintiffs seek to represent a class of plan participants "for whose individual accounts the Plan held shares of Dynegy stock at any time from February 1, 2000 to the present.

Defendants are individuals and entities who are or have been fiduciaries of the plan at some or all times between February 2000 and the present, including members of the Dynegy Inc. Benefit Plan Committee. Each individual defendant, at the time he or ...


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