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Baker v. Kingsley

May 31, 2007


The opinion of the court was delivered by: Judge Robert W. Gettleman


Plaintiffs James Baker, Raymond Wolfe, William Pate, Gary Gerdman, Patrick Giddings, and Patricia Densmore, individually and on behalf of all others similarly situated, filed a three-count fourth amended complaint against defendants Alfred Kingsley, Gary Duberstein, David Jones, Jr., Frank Sica, and Greenmarine Holdings, LLC ("Greenmarine"), alleging a breach of fiduciary duty under § 404 of the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1104, by defendant's failure to fund an employee benefit plan sufficiently. In a Memorandum Opinion and Order dated October 10, 2006, this court denied defendants' motion to dismiss plaintiffs' fourth amended complaint, but granted defendants' motion for summary judgment as to Count III. Baker v. Kingsley, 2006 WL 2927606 (N.D. Ill. 2006).

Plaintiffs have filed a motion for class certification pursuant to Fed. R. Civ. P. 23. Plaintiffs seek to certify a class on behalf of all former benefit plan participants, which they believe contains approximately 6700 individuals. Defendants oppose the motion to certify the class and have combined their opposition to (another) motion to dismiss, arguing that: (1) plaintiffs do not have standing; and (2) plaintiffs do not meet the requirements of Fed. R. Civ. P. 23(a) or 23(b). For the reasons discussed below, plaintiffs' motion for class certification is granted.


Plaintiffs are former employees of Outboard Marine Corporation ("OMC") at its Waukegan, Illinois, manufacturing and production plant.*fn2 Plaintiffs Baker and Wolfe were members of the machinists' labor union, plaintiffs Giddings and Densmore were non-union employees, and plaintiffs Pate and Gerdman were retirees. Plaintiffs Baker, Wolfe, Giddings, and Densmore worked at the Waukegan plant until it closed on December 21, 2000, on which date OMC terminated them. All named plaintiffs were retired or eligible for retirement as of the date the plant closed.

As of December 21, 2000, all named plaintiffs were participants in the OMC Consolidated Health and Welfare Plan, an ERISA welfare plan. According to plaintiffs, the plan operated through several different plan instruments. Plaintiffs Densmore and Giddings were in Plan A, which covered managerial and non-union employees, and which required a "funding method or policy" that was "consistent with the objectives of the plan." Plaintiffs Baker, Wolfe and Pate were in Plan B, which covered union employees and union retirees, and which contained the same funding policy language as Plan A. Plan C, which covered union employees and union retirees in the Milwaukee plant, including plaintiff Gerdman, contained the same language.*fn3 Plaintiff Densmore was originally in Plan D, which covered union employees in the Georgia plant, but was in Plan A when she was terminated. Defendants argue that plaintiffs Baker, Wolfe and Pate were not in Plan B, but instead in Plan E, which covered retirees and retirement-eligible employees, and which had no funding requirement. Plaintiffs claim that plan E is invalid because it was allegedly "adopted secretly, on the eve of bankruptcy, and not disclosed to the retirees within 210 days, as required by Section 104 of ERISA, 29 U.S.C. § 1124."

On December 22, 2000, OMC filed for Chapter 11 bankruptcy and ceased providing health benefits to employees and retirees under the benefit plan. On February 9, 2001, the bankruptcy court approved the sale of substantially all of OMC's assets for approximately $90 million.

Plaintiffs allege that defendants breached their fiduciary duty to plaintiffs under § 404 of ERISA by failing to: (1) place funds in the OMC Consolidated Plan sufficient to meet the long-term needs of OMC retirees; and (2) reserve enough funds to offer COBRA health coverage to employees, including those eligible for retirement, who were terminated by OMC when the Waukegan plant closed.



Defendants argue that plaintiffs lack standing*fn4 to bring an action under § 502 of ERISA because the statute allows only current, not former, plan participants to bring suits.*fn5 Defendants' position is incorrect. As this court held in its October 10, 2006, order, plaintiffs have a right to seek equitable relief in the form of a constructive trust under § 409 of ERISA. Further, as plaintiffs discuss, federal law defines a "participant" as "an employee or former employee...who is or may become eligible to receive a benefit of any type from an employee benefit plan..." 28 U.S.C. § 1002(7). Numerous courts recognize this right of former plan participants to bring suit to recover benefits under ERISA See, e.g., Waller v. Blue Cross, 32 F.3d 1337, 1339-40 (9th Cir. 1993) (former employees had standing to bring suit regarding a terminated pension plan to pursue equitable remedy for breach of fiduciary duty); Wright v. Bosch Trucking Co., 804 F. Supp. 1069, 1070-72 (C.D. Ill. 1992) (former employee had standing to pursue equitable remedy for breach of fiduciary duty when his benefit plan was terminated while underfunded).

Defendants argue that former employees are participants only if they have: (1) a reasonable expectation of returning to covered employment, or (2) a colorable claim to vested benefits, as set out in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). Defendants argue that because the benefits in question did not "vest," plaintiffs lack standing to bring a claim under ERISA. The Seventh Circuit, however, has interpreted the Supreme Court's use of "vested benefits" broadly to mean that "standing is available to any former employee who has a colorable claim to benefits which the employer promised to provide pursuant to the employment relationship and which a non-frivolous argument suggests have accrued to the employee's benefit." Panaras v. Liquid Carbonic Industries Corp., 74 F.3d 786, 791 (7th Cir. 1996). Further, despite defendants' claims, plaintiffs do argue (in Count II) that their retirement benefits had accrued to them because they were entitled to 36 months of COBRA coverage upon retirement or termination of employment. Under Panaras, then, plaintiffs have standing to sue defendants under ERISA.

Finally, all named plaintiffs were employees and plan participants at the time of the alleged violation: the decision not to provide sufficient funding for COBRA coverage or retiree medical costs. As noted by the Fifth Circuit, "the employer should not be able through its own malfeasance to defeat the employee's standing." Christopher v. Mobil Oil Corp., 950 F.2d 1209, 1221 (5th Cir. 1992). See also Panaras, 74 F.3d at 791; Willett v. Blue Cross & Blue Shield, 953 F.2d 1335, 1342-43 (11th Cir. 1992); Amalgamated Clothing & Textile Workers v. ...

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