The opinion of the court was delivered by: Reagan, District Judge
Anthony Abbott, Eric Fankhauser, Lloyd DeMartini, Jack Jordan and Dennis Tombaugh filed this class action against Lockheed Martin Corporation and Lockheed Martin Investment Management Company (collectively, "the company," unless specificity is needed) under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1002 et seq. ("ERISA"). The class alleges that the fiduciaries of the Plans breached their duties to the Plans as a whole, resulting in lost retirement savings of hundreds of millions of dollars.
On April 3, 2009, the Court continued this action on its own motion, noting that a number of variables could impact and alter its fair outcome. Among the variables identified by the Court was Plaintiffs' alerting the Court and opposing counsel that Mr. Abbott, on behalf of the Plan, intended to pursue a direct action under 29 U.S.C. §§ 1132 and 1109. A direct action allegedly allows Mr. Abbott to pursue the company stock fund claims, which the Court would not permit by way of class action. The Court directed the parties to meet and confer with a view toward preparing a briefing schedule on this issue. The matter is now fully briefed and ready for disposition.*fn1
ERISA expressly provides jurisdiction for a participant to bring an action to recover damages caused to the plan by a fiduciary's breach of duties. 29 U.S.C. § 1132(a).*fn2 In Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985), the United States Supreme Court held that a participant in a disability plan that paid a fixed level of benefits could not bring suit under § 502(a)(2) to recover consequential damages arising from delay in the processing of her claim. The Court reasoned that, under § 409, "... not only is the relevant fiduciary relationship characterized at the outset as one 'with respect to a plan,' but the potential personal liability of the fiduciary is 'to make good to such plan any losses to the plan... and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan....'" Russell, 473 U.S. at 140 (emphasis in original).
However, by 2008, a sea change had occurred in the type of plan offered to employees, leading the United States Supreme Court to clarify the right of employees to sue plan fiduciaries for mismanaging individual accounts - rather than just the plan as a whole. LaRue v. DeWolff, Boberg & Associates, Inc, 552 U.S. 248, 128 S.Ct. 1020 (2008). The Court distinguished its holding in Russell,which dealt with a defined benefit plan, stating that the "landscape" of employee benefit plans had changed, and "defined contribution plans dominate the retirement plan scene today." LaRue, 128 S.Ct. at 1025. The Court explained, "Whether a fiduciary breach diminishes plan assets payable to all participants and beneficiaries, or only to persons tied to particular individual accounts, it creates the kind of harms that concerned the draftsmen of § 409." Id. As a result, the Court held that "although § 502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries, that provision does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant's individual account." Id. at 1026.
A. Plaintiffs waived the direct action theory.
The company contends that Plaintiffs' direct action theory is an attempt to evade the Court's ruling that intra-class conflicts preclude class certification on Plaintiffs' company stock fund claims. See Doc. 239.*fn3 The company submits that Plaintiffs did not raise this theory until after their attempt for class certification failed, by which time they had already defined the scope of their case and had represented to the Court that they had no other basis for Plan-wide recovery. On this ground, the company asserts that Plaintiffs have waived the right to pursue damages for absent Plan participants through any other mechanism.
In support of its contentions, the company states that Plaintiffs failed to raise the direct action theory in the initial complaint, the amended complaint, and in the first and second motions for class certification. Indeed, according to the company, Plaintiffs made it abundantly clear that they had no other avenue for obtaining Plan-wide relief, insisting, "The need for class certification is clear.... Plaintiffs seek relief for the Plans as a whole. Class certification is required to grant that relief and is justified under the circumstances." Doc. 249, p. 3 (quoting Doc. 161, memorandum in support of second motion to certify class). In sum, the company maintains that the absence of any discussion of a direct action theory prior to the Court's ruling on class certification coupled with Plaintiffs' adamant insistence that failure to certify a class would destroy their ability to recover substantial damages against the breaching fiduciaries effected a waiver of this legal theory.
Plaintiffs respond that they did not waive their right to a direct action to recover all Plan-wide damages. Specifically, Plaintiffs assert that in ¶ 20 of the amended complaint, they indicated that their claims were brought on behalf of the Plan, as follows: "Plaintiffs seek relief on behalf of the Plan under 1109 and 1132." They submit that in both the initial and amended complaints they stated that they sought recovery for all losses "on a plan wide basis" and that they were suing "individually and on behalf of all those similarly situated." Plaintiffs explain that, as soon as the Court indicated that it would deny certification, they promptly reiterated their right to maintain a direct action for plan-wide relief as alleged in the complaint.
It is undisputed that Plaintiffs could individually pursue actions to restore their individual accounts. See LaRue, supra. However, the case caption, which indicates that Plaintiffs sue "individually and on behalf of all those similarly situated," does not presage a direct action theory but merely states the obvious - that Plaintiffs sue on behalf of themselves and a similarly situated class of employees. Furthermore, the general allegations to which Plaintiffs point fail to give the company "fair notice of what the... claim is and the grounds upon which it rests."Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009), quoting Erickson v. Pardus, 551 U.S. 89, 93 (2007); see also Holtzman v. Caplice, 2008 WL 2168762, *2 (N.D.Ill. 2008). As the Seventh Circuit explained in Brooks, First, a plaintiff must provide notice to defendants of [his] claims. Second, courts must accept a plaintiff's factual allegations as true, but some factual allegations will be so sketchy or implausible that they fail to provide sufficient notice to defendants of the plaintiff's claim. Third, in considering the plaintiff's factual allegations, courts should not accept as adequate abstract recitations of the elements of a cause of action or conclusory legal statements. Id., explicating Erickson, 551 U.S. 89, Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937 (2009).
Plaintiffs' pleadings failed to provide adequate notice to the company that they intended to pursue a direct action theory.
Moreover, despite the filing of, literally, hundreds of documents comprising thousands of pages, nothing alerted the undersigned District Judge to Plaintiffs' intent to pursue a direct action theory prior to the April 3, 2009, teleconference, some two-and-one-half years after the case was filed and after the Court notified the parties that it would grant class certification, except for the company stock funds. See Docs. 236-238. The absence of any discussion of the direct action theory in the amended ...