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Carlson v. Northrop Grumman Corp.

United States District Court, N.D. Illinois, Eastern Division

October 20, 2014



MARIA VALDEZ, Magistrate Judge.

Presently before the Court is a Motion for Leave to File a First Amended Complaint [Doc. No. 39] by plaintiffs Alan Carlson and Peter Deluca ("Plaintiffs") pursuant to Fed.R.Civ.P. 15(a)(2). Plaintiffs seek to amend the complaint to include claims for class-wide relief. Defendants, Northrop Grumann Corporation and the Northrop Grumman Severance Plan ("Defendants"), oppose the motion. The Court has jurisdiction pursuant to 28 U.S.C. § 1331. For the following reasons, the Court grants Plaintiffs' motion.


Plaintiffs are former employees of defendant Northrop Grumman Corporation ("Northrop"). As part of their employment, Plaintiffs were enrolled in the Northrop Grumman Severance Plan ("the Plan"), which is an employee "welfare benefit plan" governed by Title I of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461. See 29 U.S.C. § 1002(1); 29 C.F.R. § 2510.3-1(a)(3). As the Plan Sponsor and Plan Administrator, Northrop is in charge of the administration and oversight of the Plan.

Before 2011, the Plan consisted of the Northrop Grumman Severance Plan Summary Plan Description ("SPD"), which is a summary of employee benefits that is distributed to all Northrop employees. However, in 2011, Northrop changed its policy and introduced the Wrap Plan. Among other things, the Wrap Plan provides Northrop with the authority to interpret the Plan's terms. According to this new scheme, the SPD is one of a number of component plans, which, together with the Wrap Plan, constitute the Plan. The Wrap Plan, however, was not distributed to employees.

At issue are the eligibility criteria for severance benefits contained in the SPD, which states in relevant part that in order to receive benefits: "[y]ou must be designated as eligible for this plan by a vice president of human resources.... You are designated if you received a memo addressed to you, notifying you of your eligibility for this benefit." (SPD at 3 [Compl., Ex. 1].) According to Plaintiffs, before 2011, Northrop merely treated the memo from human resources ("the Memo") as an administrative tool to notify employees who were already eligible for severance benefits. However, after 2011, and pursuant to the authority conferred by the Wrap Plan, Northrop changed its policy by interpreting the SPD to mean that receipt of the Memo is a condition precedent to receiving benefits. Accordingly, whether an employee was entitled to benefits was, in part, a matter for human resources to decide on a case by case basis.

After being laid off on August 3, 2012, Plaintiffs did not receive the Memo. As a result, Northrop's claim processors determined that Plaintiffs were not eligible for severance benefits, although they continued to provide Plaintiffs health benefits under the Plan. This came as a great surprise to Plaintiffs because Northrop never communicated the policy change to its employees. Consequently, Plaintiffs filed a complaint against Defendants on April 9, 2013, claiming that Defendants violated their rights under ERISA.

Count I of the original complaint alleges that Defendants owe Plaintiffs severance benefits due under the Plan pursuant to ERISA Section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). In Count II, Plaintiffs allege that Northrop unlawfully interfered with their right to obtain benefits under the Plan by failing to deliver the Memo, in violation of ERISA Section 510, 29 U.S.C. § 1140.[1] Now, after the parties exchanged initial discovery, Plaintiffs claim that Defendants similarly denied severance benefits to many other Northrop employees, and thus Plaintiffs seek leave to amend the complaint to include claims for class-wide relief on behalf of similarly situated Northrop employees. Specifically, Plaintiffs seek to bring Counts I and II on behalf of the proposed class, and to add third count for equitable reformation of the Plan pursuant to ERISA Section 502(a)(3), 29 U.S.C. § 1132(a)(3).


Where, as here, there is no Rule 16(b) scheduling order limiting the time to amend pleadings, a proposed amendment should be analyzed under Rule 15(a). Caliber One Indem. Co. v. Millard Chi. Window Cleaning, LLC, No. 04 C 2424, 2005 WL 1206472, at *3 (N.D. Ill. May 12, 2005) (citing Campania Mgmt. Co. v. Rooks, Pitts & Poust, 290 F.3d 843, 848-49 n.1 (7th Cir. 2002)). In relevant part, Rule 15(a) provides that after a responsive pleading has been filed, a party may amend the pleading only by leave of court. Fed.R.Civ.P. 15(a). Leave to amend should be freely given unless the amendment would be futile, or result in undue delay or undue prejudice to the opposing party. Id .; Cannon v. Washington, 418 F.3d 714, 720 (7th Cir. 2005). However, the decision to grant leave to amend is committed to the sound discretion of the trial court. King v. Cooke, 26 F.3d 720, 723 (7th Cir. 1994).

In the instant matter, Defendants argue that Plaintiffs' Motion should be denied because: (1) Plaintiffs unduly delayed filing the Motion; (2) Defendants will be unduly prejudiced if it is granted; (3) Plaintiffs do not have standing to bring any of their claims under ERISA; and (4) Plaintiffs cannot maintain a class action under Rule 23. The Court addresses each argument in turn.

A. Undue Delay

When seeking leave to amend, the movant has the burden of showing that its delay in seeking the amendment is justified. In re Ameritech Corp., 188 F.R.D. 280, 286 (1999). Nevertheless, "delay alone will not generally justify denying a motion to amend a pleading absent a showing of prejudice from the delay." King, 26 F.3d at 723. For example, where the proposed claim was previously unknown or could not have been added earlier, courts are more likely to find excusable delay. Ramada Franchise Sys., Inc. v. Royal Vale Hospitality of Cincinnati, Inc., No. 02 C 1941, 2004 WL 2966948, at *4 (N.D. Ill. Nov. 24, 2004); Cohn v. Taco Bell Corp., No. 92 C 5852, 1993 WL 390176, at *3 (N.D. Ill. Oct. 1, 1993) ("Where the proposed causes of action are related to the claims contained in the initial complaint, and where the need to amend [does] not become apparent until after some discovery is completed, the general rule is to allow the movant to amend its complaint.").

Here, Plaintiffs argue that they did not unduly delay filing the proposed amendment because the facts supporting the amendment were not available until the parties exchanged initial discovery. In response, Defendants assert that Plaintiffs' delay is necessarily undue because more than a year has passed since the original complaint was filed. Furthermore, Defendants note that the original complaint alleges that at least two other Northrop employees were similarly denied severance benefits, and therefore Defendants argue that Plaintiffs could have filed a class claim at the inception of this case. The Court agrees with Plaintiffs.

Although the proposed amendment was filed more than a year after the original complaint, the record reveals that the delay was not Plaintiffs' fault. Plaintiffs filed this case on April 9, 2013. Defendants then filed a motion to dismiss on May 17, 2013. Six months later, and before the motion to dismiss was ruled upon, the Executive Committee ordered the case reassigned to another District Judge. According to the Joint Reassignment Status Report filed before that District Judge, "Defendants communicated they believe all discovery and disclosures should be stayed until [the motion to dismiss] is ruled upon." [Doc. No. 22 at 2.] Plaintiffs agreed, and thus the parties did not exchange discovery. The case then remained pending without any ruling on the motion to dismiss until March 31, 2014, after the parties consented to the jurisdiction of this Court. The Court then denied the motion to dismiss, and discovery finally commenced. As such, this case lingered for an entire year without any exchange of discovery.

Once discovery began, Plaintiffs promptly filed the instant Motion less than one month after they discovered the pertinent facts from Defendants' responses. ( See Pls.' Mot., Exs. 3, 4.) A one-month gap is hardly a delay, much less an undue delay. See, e.g., Cowart v. David J. Axelrod & Assocs., No. 03 C 5341, 2004 U.S. Dist. LEXIS 7228, at *6 (N.D. Ill. Apr. 26, 2004) (excusing eight-month delay in seeking leave to amend even though plaintiff's excuse for the delay was "lacking"). Thus, as Plaintiffs have a legitimate excuse for the year-long delay, the Court finds that it was not undue.

The Court is similarly unpersuaded by Defendants' second argument - that Plaintiffs "admitted in their original complaint that they had knowledge of additional individuals who were denied severance benefits by Northrop, " and therefore Plaintiffs could have brought a class claim in the first instance. (Defs.' Br. in Opp'n at 7.) In order for this argument to succeed, it must be shown that Plaintiffs could have satisfied the pleading requirements of Rule 8 and ...

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