Atwood v. Burlington Industries Equity, Inc.

164 F.R.D. 177, 32 Fed. R. Serv. 3d 1307, 1995 U.S. Dist. LEXIS 20629, 1995 WL 755609
CourtDistrict Court, M.D. North Carolina
DecidedMay 23, 1995
DocketNo. 2:92CV00716
StatusPublished
Cited by1 cases

This text of 164 F.R.D. 177 (Atwood v. Burlington Industries Equity, Inc.) is published on Counsel Stack Legal Research, covering District Court, M.D. North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Atwood v. Burlington Industries Equity, Inc., 164 F.R.D. 177, 32 Fed. R. Serv. 3d 1307, 1995 U.S. Dist. LEXIS 20629, 1995 WL 755609 (M.D.N.C. 1995).

Opinion

MEMORANDUM OPINION AND ORDER

OSTEEN, District Judge.

Plaintiffs Daniel Lee Atwood and Janice Lee Corneal are employees of Defendant Burlington Industries, Inc. and are beneficiaries of Burlington’s Employee Stock Ownership Plan (“ESOP”). They have filed this action asserting that the ESOP has been devalued as the result of wrongful acts committed by the various Defendants, stating claims under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., and state law. This matter comes before the court on Plaintiffs’ Motion for Class Certification, wherein Plaintiffs seek to certify an appropriate class of ESOP beneficiaries. For the reasons stated herein, Plaintiffs’ Motion for Class Certification will be granted.

The determination of a motion for class certification is within the discretion of the district court. Boley v. Brown, 10 F.3d 218, 223 (4th Cir.1993). Certification of a class is governed by Rule 23 of the Federal Rules of Civil Procedure. Pursuant to Rule 23, a class may be certified only where Plaintiffs can satisfy all four requirements of Rule 23(a), and at least one of the three elements of Rule 23(b). Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 163, 94 S.Ct. 2140, 2145, 40 L.Ed.2d 732 (1974). In a Memorandum Opinion and Order dated February 13, 1995, the court found that Plaintiffs satisfied the requirements of Rule 23(a), and directed the parties to brief the issue of how to properly define the class and whether any special procedures should attend the class certification process.

The parties appear to agree, and the court finds that certification, if done, should be carried out under Rule 23(b)(1). Although the class appears to be certifiable under subsection (b)(1) or (b)(3), the Fourth Circuit has noted that the policy underlying class actions requires certification under (b)(1) in such a circumstance:

If an action can be maintained under (b)(1) and/or (b)(2), and also under (b)(3), the court should order that the suit be maintained as a class action under (b)(1) and/or (b)(2), rather than under (b)(3), so that the judgment will have res judicata effect as to all the class (since no member has the right to opt out in a (b)(1) or (b)(2) suit), thereby furthering policy underlying (b)(1) and (b)(2) class suits.

In re AH. Robins Co., Inc., 880 F.2d 709, 728 (4th Cir.), cert. denied, 493 U.S. 959, 110 S.Ct. 377, 107 L.Ed.2d 362 (1989). Moreover, the parties agree that should the court decide to certify a class, the class should be defined as:

Ml persons who are or were Members, or are or were Beneficiaries, of the Burlington ESOP and who became vested in Account A under Article VILA of the Burlington ESOP Plan (with capitalized terms used in this sentence being defined as defined in the Burlington ESOP Plan).

Thus, the only issue before the court upon which substantial disagreement exists is whether any special procedures should attend certification of the class to allow poten[179]*179tial members of the class to avoid involvement in this action.

Defendants contend that certification of a class should occur only after an accelerated proof of claims process takes place. Under this process, each potential member of the class would receive a notice informing the person of his or her eligibility for the class and giving a brief description of the contentions of the parties. The recipient of the notice would only become a member of the class upon taking the affirmative action of returning the notice with an indication that he or she wishes to proceed in the lawsuit. Despite their awareness of the fact that in an ordinary (b)(1) action the absent class members automatically become members of the class without notice, Defendants nonetheless assert that an accelerated claims process is appropriate in the case at bar for several reasons.

First, Defendants rely principally on the contention that the case at bar is a “one-of-a-kind” ESOP case, rather than an ordinary challenge to the devaluation of an ESOP under ERISA. Defendants base this position on the fact that the shares of each beneficiary under the ESOP at issue are fixed and ascertainable and have been since the ESOP shares were allocated in September 1993. See Smith Aff. ¶5. Therefore, according to Defendants, any injury in this case is not to the ESOP, but rather to a distinct group of individuals with separable interests, and this group of individuals should be asked whether they wish to proceed with the lawsuit. Given the requirements for an ERISA action as pled by Plaintiffs, however, this contention is unpersuasive. Although the interests of the ESOP beneficiaries are now fixed and ascertainable, they were not at the time of the alleged wrongful conduct which devalued the ESOP. The ESOP interests did not become fixed until 1993, and the conduct alleged by Plaintiffs occurred prior to that date. Injury prior to that date necessarily was done to the Plan, not to a group of individuals. Moreover, the fact that Plaintiffs have stated claims under ERISA wholly undermines Defendants’ contention that the injury here is to individuals rather than to the ESOP itself. An action against a fiduciary under ERISA for harm done to a retirement plan must be for the benefit of the plan as a whole, not for the gain of any one beneficiary. Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134,140-42, 105 S.Ct. 3085, 3089-90, 87 L.Ed.2d 96 (1985) (“[a] fair contextual reading of the statute makes it abundantly clear that the draftsmen were primarily concerned with ... remedies that would protect the entire plan, rather than with the rights of an individual beneficiary”). In finding that the Plaintiffs have properly stated claims under ERISA, the court has necessarily found that the injury alleged was to the ESOP itself rather than any group of individuals, because Russell makes clear that an ERISA action can only be brought for injury to the plan. The court’s prior ruling, which failed to dismiss Plaintiffs’ ERISA claims, forecloses Defendants’ argument that the alleged injury is to a group of individuals rather than to the ESOP.

Defendants also contend that an accelerated claims process is desirable because some Burlington employees may view this action as a “strike suit,” designed solely to harm the company and drain it of resources. Such a contention, however, is nothing but that — a contention. Plaintiffs have met the requirements of Rule 23, and in an ordinary (b)(1) action no notice or accelerated claims procedure is required. Neither the contention that the alleged injury is to a group of ascertainable individuals nor the contention that this action is a strike suit are sufficiently persuasive to move the court to impose an accelerated claims process on this (b)(1) class action.

Other factors counsel against imposition of an accelerated claims process.

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Bluebook (online)
164 F.R.D. 177, 32 Fed. R. Serv. 3d 1307, 1995 U.S. Dist. LEXIS 20629, 1995 WL 755609, Counsel Stack Legal Research, https://law.counselstack.com/opinion/atwood-v-burlington-industries-equity-inc-ncmd-1995.