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Resnick v. Schwartz

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

December 27, 2019



          Honorable Edmond E. Chang United States District Judge

         Over 17 years ago, Dr. Donald Schwartz withdrew, in a lump sum, over $800, 000 in benefits from his pension-plan account with Associated Allergists. R. 29, Corr. Am. Compl. at 3 ¶ 2.[1] But he should not have taken a lump sum: under federal pension-benefits law (known by its acronym, ERISA), Dr. Schwartz was considered a “highly compensated” employee, so he was required to take annuity payments over time instead of a lump-sum payment. Id. at 3 ¶ 3. Eventually, the Plan's current fiduciaries, Drs. Alan Resnick and James Thompson, brought suit against both Dr. Schwartz and the Plan's then-actuaries, Ronald Spitz and Ronald Spitz and Associates[2] (collectively the Defendants), alleging ERISA violations as well as Illinois state claims. See Corr. Am. Compl. at 12-22.[3]

         Earlier in the case, both Dr. Schwartz and the Spitz Defendants independently moved to dismiss the claims against them. R. 32, Spitz's Mot. Dismiss Br.; R. 36-1 Schwartz's Mot. Dismiss Br. As relevant here, Schwartz argued that the Plaintiffs' claims were barred by ERISA's three-year statute of limitations. The Court agreed with Schwartz in general, but nevertheless denied Schwartz's motion to dismiss because the fraudulent-concealment exception to ERISA's statute of limitations might apply. Whether the exception applied, though, could not be resolved at the pleading stage, so the Court allowed the parties to take discovery on that limited issue. After the parties finished the limited discovery, the Defendants moved for summary judgment, R. 87, Defs.' Mot. Summ. J., and t1he Plaintiffs cross-moved against the limitations defense, R. 89, Pls.' Mot. Summ. J. For the reasons discussed below, the Defendants' motion is granted.

         I. Background

         A. Factual Background

         This Opinion assumes familiarity with the facts described in the prior opinion that decided the Defendants' motions to dismiss. R. 61, 9/3/18 Opinion at 2-6; Resnick v. Schwartz, 2018 WL 4191525, at *1-2 (N.D. Ill. Sept. 3, 2018). In deciding the motion for summary judgment, the Court must view the evidence in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Because both parties have both moved for summary judgment, the Court will consider the evidence in the light most favorable to each party to see if the opposing party is entitled to summary judgment.[4]

         Sometime in early 2000, Dr. Donald Schwartz retired and became eligible to receive payments from his pension plan with Associates Allergists & Asthma (for clarity's sake, this opinion will call it the “Plan”). R. 86, DSOF ¶¶ 4, 8; R. 89-2, Pls.' Resp. DSOF ¶¶ 4, 8.[5] At the time of his retirement, the total amount due to Schwartz from the Plan was at least $822, 596. DSOF ¶ 8; Pls.' Resp. DSOF ¶ 8. Schwartz chose to have those pension benefits paid in a single lump sum, rather than smaller annual payouts through an annuity. DSOF ¶ 11; Pls.' Resp. DSOF ¶ 11. On February 16, 2000, Schwartz received a lump-sum payment of $822, 596. DSOF ¶ 17; Pls.' Resp. DSOF ¶ 17. About a year later, Ronald Spitz, the actuary for the Plan from 1999 through 2016, mailed Associated Allergists the IRS forms related to participant distributions for calendar year 2000, which included Schwartz's 2000 Form 1099-R. DSOF ¶ 19; Pls.' Resp. DSOF ¶ 19. That form reflected the $822, 596 lump-sum distribution to Schwartz that was made back in February 2000. Id.

         At the time of the distribution, Schwartz did not personally communicate with Dr. Alan Resnick or Dr. James Thompson, who were Trustees of the Plan (as well as participants and beneficiaries of the Plan), about the distribution. DSOF ¶ 21; Pls.' Resp. DSOF ¶ 21. But neither did Schwartz take any overt acts to conceal the distribution from Resnick or Thompson. DSOF ¶ 22; Pls.' Resp. DSOF ¶ 22. Either way, the Plan, Resnick, and Thompson all knew about the lump-sum disbursement the day it was made. DSOF ¶¶ 17-18; Pls.' Resp. DSOF ¶ 17-18; R. 89-1, PSOF ¶ 1. What Resnick and Thompson did not know at the time, however, was that Schwartz was restricted from taking a lump-sum payment from the pension fund under ERISA because he was a “highly compensated” employee, as defined by the Internal Revenue Code. DSOF ¶¶ 12-13; Pls.' Resp. DSOF ¶¶ 12-13. Since at least 1994, the Plan has included that regulatory restriction against highly compensated employees in the written terms of the Plan document. DSOF ¶ 14; Pls.' Resp. DSOF ¶ 14. But it was not until May 2016, when the Plan's new actuary discovered the applicability of the restriction, that Resnick and Thompson, along with the other Trustees, beneficiaries, and participants of the Plan, actually found out that Schwartz's lump-sum distribution was not proper under the law. PSOF ¶ 6; Defs.' Resp. PSOF ¶ 6.

         B. Procedural History

         Some seventeen years after the lump-sum distribution, Resnick and Thompson sued Schwartz and Spitz for the illegal lump-sum withdrawal. The Plaintiffs asserted in their Amended Complaint that Dr. Schwartz violated his fiduciary duties to the Plan under ERISA (Count 1) and participated in a prohibited transaction (Count 2). The Plaintiffs further contended that Spitz too participated in the prohibited transaction (Count 3), and that Spitz should be ordered to disgorge his fees (Count 4). The Plaintiffs also brought supplemental state law claims against Spitz (Counts 5, 6, and 7).[6] Both Dr. Schwartz and the Spitz Defendants independently moved to dismiss the claims against them, arguing that the Corrected Amended Complaint (for convenience's sake, the remainder of the Opinion will drop the “Corrected”) failed to adequately state a claim, and in any event, the claims are barred by the statute of limitations. See Spitz's Mot. Dismiss Br.; Schwartz's Mot. Dismiss Br.

         The Court granted Spitz's motion to dismiss the ERISA claims, and denied Schwartz's motion. Resnick, 2018 WL 4191525, at *10. As relevant here, the Court held that, on the face of the Amended Complaint, the claims against Schwartz were barred by ERISA's three-year statute of limitations because the lump-sum distribution happened in 2000 and the Plaintiffs knew about the distribution at that time. Id. at *6. But the Plaintiffs' had invoked ERISA's longer fraud-or-concealment statute of limitations, which gives a plaintiff “six years after the date of discovery of such breach or violation” to commence an action, 29 U.S.C. § 1113. Id. at *6-7. And at that stage of the case, the Plaintiffs were not required to plead the facts underlying the exception. See id.; Xechem, Inc. v. Bristol-Myers Squibb Co., 372 F.3d 899, 901 (7th Cir. 2004). So the Court denied Schwartz's motion to dismiss to allow for limited discovery on whether the fraudulent-concealment exception applies. Resnick, 2018 WL 4191525, at *7. The Court also stayed the state law claims against Spitz until the limitations defense as to Schwartz was resolved.

         After finishing the limited discovery, both sides have now moved for summary judgment on the statute of limitations defense. Schwartz and Spitz filed a combined motion arguing that the undisputed facts revealed in discovery now demonstrate that ERISA's fraudulent-concealment exception does not apply. In response, the Plaintiffs argue that the undisputed facts show that the exception applies.

         II. Standard of Review

         Summary judgment must be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine issue of material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In evaluating summary judgment motions, courts must “view the facts and draw reasonable inferences in the light most favorable to the” non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007) (cleaned up).[7] The Court “may not weigh conflicting evidence or make credibility determinations, ” Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704 (7th Cir. 2011) (cleaned up), and must consider only evidence that can “be presented in a form that would be admissible in evidence.” Fed.R.Civ.P. 56(c)(2). The party seeking summary judgment has the initial burden of showing that there is no genuine dispute and that they are entitled to judgment as a matter of law. Carmichael v. Village of Palatine, 605 F.3d 451, ...

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