Faircloth v. Lundy Packing Co.

91 F.3d 648, 20 Employee Benefits Cas. (BNA) 2493, 1996 U.S. App. LEXIS 19006, 1996 WL 431813
CourtCourt of Appeals for the Fourth Circuit
DecidedAugust 2, 1996
Docket95-1275
StatusPublished
Cited by121 cases

This text of 91 F.3d 648 (Faircloth v. Lundy Packing Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Faircloth v. Lundy Packing Co., 91 F.3d 648, 20 Employee Benefits Cas. (BNA) 2493, 1996 U.S. App. LEXIS 19006, 1996 WL 431813 (4th Cir. 1996).

Opinions

Affirmed in part, reversed in part and remanded by published opinion. Judge HAMILTON wrote the opinion, in which Judge WILLIAMS joined. Judge MICHAEL wrote a separate opinion concurring in part and dissenting in part.

OPINION

HAMILTON, Circuit Judge:

Janice Fay Faireloth, Evelyn D. Frederick, and Callweall W. Smiling (the Appellants), three participants in the employee stock ownership plan (the ESOP) of Lundy Packing Company (Lundy), brought this action against Lundy, which is the ESOP’s administrator, and Annabelle L. Fetterman and Mabel F. Held, who are the ESOP’s trustees. The Appellants alleged that Lundy, Fetter-man, and Held violated provisions of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461, by refusing to furnish certain documents to the Appellants. On October 12, 1994, the district court granted partial summary judgment in favor of Lundy, Fetterman, and Held. On January 20, 1995, the district court granted summary judgment in favor of the Appellants on their remaining claims and imposed penalties on Lundy for its refusal to furnish some of the documents to the Appellants. The Appellants appeal both orders.1 We affirm in part, reverse in part, and remand with instructions.

I.

Lundy, a North Carolina closely held corporation that sells pork products, established the ESOP in 1976. Lundy employees who have completed one year of employment with Lundy are eligible to participate in the ESOP. The ESOP provides benefits to participants upon defined events, such as retirement. Lundy maintains an account for each participant and provides each participant with an annual statement of her or his account. The amount of a participant’s benefits under the ESOP is based on the participant’s account balance.

The majority of the assets of the ESOP are invested in Lundy stock. An independent appraiser values Lundy stock and provides Lundy with an appraisal report on an annual basis. Lundy uses the valuation contained in the annual appraisal reports in calculating the account balances of ESOP participants.

In 1992, the Appellants received statements of account showing that the value of Lundy stock declined by approximately 42% between June 1991 and July 1992 and that their account balances had dropped as a result. When the Appellants received these statements of account, the United Food and Commercial Workers Union (the Union) was conducting an organizational campaign at Lundy. Concerned about the drop in their account balances, the Appellants turned to a Union representative for assistance in determining why the value of Lundy stock had declined. The Union then prepared identical letters, dated March 23, 1993, that each of the Appellants signed, requesting the following documents from Lundy in its capacity as plan administrator: .(1) the plan document; (2) the trust agreement; (3) the latest summary plan description (SPD); (4) any other rules and regulations governing the ESOP; (5) the last three annual reports (Form 5500s); (6) the last three audited financial statements for the ESOP; (7) the last three summary annual reports; (8) the last three summaries of material modifications; (9) any contracts between the ESOP and any third party, including insurance contracts and contracts with custodians of assets and investment managers; (10) any policies adopted by the ESOP’s fiduciaries, including any invest[652]*652ment policy, trustee expense policy, cost-sharing policy, and funding policy; (11) any insurance policy and/or bonding policy covering the ESOP and its fiduciaries; (12) minutes of any meeting regarding the ESOP during the last three years; (13) the last IRS determination of tax qualification for the ESOP; and (14) the results of discrimination tests under I.R.C. §§ 401(k) and 401(m).

On April 19, 1993, after reviewing the requests with Fetterman, Held notified the Appellants that Lundy would only provide them with the plan document, the trust agreement, the latest SPD, and the last three summary annual reports. Held also informed the Appellants that no summaries of material modifications existed and asked the Appellants to clarify requests nine, ten, and twelve. The Appellants never provided a clarification of these requests.

On May 25, 1993, the Appellants sent Lun-dy another letter — this time requesting all appraisal reports regarding Lundy stock and “any and all documents concerning [Lundy’s] financial status and operations supplied to the person or entity that prepared each appraisal or valuation report[ ].” (J.A. 42). Two days later, the Appellants filed this action against Lundy, Held, and Fetterman, claiming that they had violated ERISA by refusing to provide the documents requested in the March 23 letter.

On June 18,1993, Held, acting on behalf of Lundy, denied the Appellants’ May 25 requests, but informed the Appellants that upon further review of the March 23 requests, Lundy had determined that they were entitled to the last three Form 5500s. Accordingly, Held provided those documents to the Appellants. On July 21, 1993, the Appellants amended their complaint to allege that Lundy’s refusal to provide the documents requested on May 25 constituted an additional violation of ERISA.

After conducting discovery, both sides moved for summary judgment. On October 12, 1994, the district court granted partial summary judgment in favor of Lundy, Held, and Fetterman. The district court determined that the Appellants were not entitled to most of the documents they requested, but reserved judgment on whether the Appellants were entitled to copies of contracts with custodians of assets, investment managers, and insurers of plan assets. On January 20, 1995, the district court determined that the Appellants were entitled to these contracts and granted summary judgment in favor of the Appellants regarding these contracts. The district court also ordered Lundy to pay each Appellant $2500 as penalties for Lun-dy’s delay in furnishing the Appellants with the Form 5500s and for its failure to furnish the Appellants with the contracts with custodians of assets, investment managers, and insurers of plan assets. The Appellants appeal both of the district court’s orders, contending that the district court erred in determining that they were not entitled to certain documents they requested and in imposing insufficient penalties against Lundy.

II.

The Appellants argue that the district court erred in determining that they were not entitled to receive five sets of documents: (1) the last IRS determination of tax qualification; (2) the bonding policy covering the ESOP and its fiduciaries; (3) the appraisal reports and supporting documentation; (4) the minutes of meetings regarding the ESOP during the last three years; and (5) the investment, funding, cost-sharing, and trustee expense policies. They claim that they are entitled to these documents under three sections of ERISA: § 104(b)(4), § 404(a)(1)(A), and § 404(a)(1)(D). We shall address each of these provisions in turn.

A.

ERISA § 104(b)(4) provides:

The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary plan description, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.

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Bluebook (online)
91 F.3d 648, 20 Employee Benefits Cas. (BNA) 2493, 1996 U.S. App. LEXIS 19006, 1996 WL 431813, Counsel Stack Legal Research, https://law.counselstack.com/opinion/faircloth-v-lundy-packing-co-ca4-1996.