Sam v . Creare CV-93-054-B 08/18/94
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Richard Sam
v. Civil N o . 93-054-B
Creare, Inc.
O R D E R
Richard Sam, a participant in Creare, Inc.'s employee
retirement plan, brings this action pursuant to 29 U.S.C. § 1132
to compel his former employer to produce a variety of corporate
and retirement plan records dating back to 1979. Creare
presently moves for summary judgment,1 contending that it has
fully complied with ERISA's disclosure requirements and has no statutory duty to provide the additional information which Sam
1 In the alternative, Creare's motion also requests that Sam's suit be dismissed pursuant to Fed. R. Civ. P. 12(b)(6). Creare argues that Sam's complaint is predicated exclusively upon state law; that I have previously held that ERISA preempts Sam's state law claims; and that Sam's complaint consequently fails to state a viable claim for relief. While Sam's original complaint sought relief under New Hampshire's corporate records statute, N.H. Rev. Stat. Ann. 293-A:52, Sam has subsequently filed an amended complaint that recasts his allegations as violations of 29 U.S.C. §1021-30. I therefore deny Creare's motion to dismiss. seeks. For the following reasons, I grant Creare's motion in
part and deny it in part.
I. FACTS A. Overview of the Creare Employee Retirement Plan
Creare, a technological consulting firm based in Hanover, New Hampshire, has an employee retirement plan that is subject to ERISA. Employees contribute to the plan by electing to have a percentage of their salary placed into a plan account and invested by the plan administrator. In addition to these "salary reduction" contributions, Creare may make "matching", "profit- sharing" and/or "stock" contributions to the retirement plan out of its current or accumulated net profits. All three types of employer contributions are made to an employee trust which holds legal title to the shares of stock, invests and manages the trust's other assets, and apportions trust income to individual employee's accounts. Each type of contribution is discretionary, and over the last several years, Creare's only contributions to the plan have been profit shares.2
2 Creare's profit-sharing plan appears to be relatively simple. For each fiscal year, the company projects what its net profits will b e , earmarks a certain amount of these profits as "non-guaranteed compensation", and includes the amount in the
2 B. Sam's Requests for Information
Sam left Creare in 1991 but still participates in the
company's retirement plan and is the beneficial owner of about 2%
of Creare's outstanding stock. In 1992, a Creare official
suggested to Sam that his stock interests might be converted to
cash and possibly distributed to him. To determine what the fair
market value of these shares were, as well as the amount of
dividends which he felt Creare's profit-sharing plan had
improperly diverted to select Creare stockholders and employees,
Sam proceeded to make a series of written requests for
information from the Creare officials who doubled as plan
trustees.
In July 1992, Sam requested that Creare "describe any
dividends received on account of the assets being held for M r . Sam's benefit, as well as the dividends declared or paid on other
shares of Creare, Inc. stock over the last 18 months." He also
inquired into defendants' profit sharing plan for the 1992 fiscal
year, and stated that "since it appears M r . Sam has received an
inordinately small share of profits for all years he held stock
provisional overhead rate it uses on its government contracts. If the money is actually available at year's end, it is then distributed to Creare's employees.
3 (1979-present), we request copies of the Creare financials for
all those years." On September 2 4 , 1993, Sam further requested: 1. Full and complete records of actual stock ownership and resulting beneficial stock ownership in Creare . . . for each year from 1979 to date. 2. Distribution percentages of the 'set aside earnings' and profits of Creare . . . , which were placed into a pool, known as the profit sharing pool ['pool'], for distribution to the shareholders as determined by the profit sharing committee for each year from 1979 to date.
3. Size of the pool for each year from 1979 to date.
4. Distribution percentages of the pool, including amounts, to each person receiving a distribution for each of the fiscal years from 1979 to date; and
5. Records of all meetings and actions of the trustees of the employee benefit plan from 1979 to date. Defendants have refused to furnish Sam with any of
the above information. Sam brings the present civil enforcement
action under 29 U.S.C. § 1132(c) to compel them to do s o .
4 II. Discussion3
Creare contends that summary judgment is appropriate because
ERISA does not require disclosure of the "sensitive" corporate
information that Sam seeks. Sam disagrees. He essentially
argues that, because ERISA governs the employee trust which holds
his shares of Creare stock, he may use the Act's disclosure
requirements to determine whether Creare's officers and directors
have improperly distributed corporate profits as profit shares
and thereby violated their fiduciary duties to the company's
3 I judge Creare's motion against the following standard. Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A "genuine" issue is one "that properly can be resolved only by a finder of fact because [it] may reasonably be resolved in favor of either party." Anderson v Liberty Lobby, Inc., 477 U.S. 2 4 2 , 250 (1986); accord Garside v . Osco Drug, Inc., 895 F.2d 4 6 , 48 (1st Cir. 1990). A "material issue" is one that "affects the outcome of the suit . . . ." Anderson, 477 U.S. at 248. The burden is upon the moving party to aver the lack of a genuine, material factual issue, Finn v . Consolidated Rail Corp., 782 F.2d 1 3 , 15 (1st Cir. 1986), and the court must view the record in the light most favorable to the non-movant, according the non-movant all beneficial inferences discernible from the evidence. Oliver v . Digital Equip. corp., 846 F.2d 103, 105 (1st Cir. 1988). If a motion for summary judgment is properly supported, the burden shifts to the non-movant to show that a genuine issue exists. Donovan v . Agnew, 712 F.2d 1509, 1516 (1st Cir. 1983).
5 stockholders.4
Sam brings suit pursuant to 29 U.S.C. § 1132, ERISA's civil
enforcement provision. This provision states, in pertinent part
[a]ny administrator . . . (B) who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant or beneficiary . . . within 30 days after such request may in the court's discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper.
Id. at (c)(1). The provision thus requires a plaintiff to
establish: (1) that the employer qualifies as a plan
administrator; (2) that the plaintiff is a plan participant or
beneficiary; (3) that the plaintiff has requested information
which ERISA otherwise requires the administrator to produce; and
(4) that the employer has refused to produce this information in response to the plaintiff's request. Satisfaction of these four
elements triggers the court's discretionary power to penalize the
4 The letters Sam submitted in response to Creare's motion for summary judgment indicate that some of his requests sought information that would assist him in determining the fair market value of his beneficial interest in Creare stock. In the present suit, however, Sam does not allege that he is entitled to disclosure on this basis. I therefore do not address whether ERISA might require disclosure of certain of Creare's financial documents to determine the cash-out value of Sam's beneficial stock interests.
6 employer and compel disclosure of the withheld information. See
Kleinhans v . Lisle Sav. Profit Sharing Trust, 810 F.2d 6 1 8 , 622
(7th Cir. 1987).
Creare does not dispute Sam's satisfaction of the first,
second and fourth elements. The plan documents name Creare as
the plan administrator, see 29 U.S.C. § 1002(16)(A)(i); Sam is a
former employee with vested benefits, see Firestone Tire & Rubber
C o . v . Bruch, 489 U.S. 1 0 1 , 118 (1989); and Creare does not
contend that it has complied with any of the requests upon which
Sam has brought suit. Consequently, the sole issue before me is
whether Sam has adequately requested information which ERISA
requires Creare to disclose.
Sam cites 29 U.S.C. §§ 1021-25, the bulk of ERISA's
disclosure requirements, as authority for his requests. Enacted
to ensure that each individual participant "knows exactly where he stands with respect to [his or her benefits] plan," Firestone,
489 U.S. at 118 (quoting H.R. Rep. N o . 533, 93d Cong., 2d Sess.
11 (1973), reprinted in 1973 U.S.C.C.A.N. 4639, 4649), these
provisions require that administrators provide participants with
information regarding the plan's operation, its annual financial
performance, and each participant's total accrued benefits.
However, rather than granting participants an unqualified right
7 to discovery, ERISA specifies the form, content and timing of the
disclosures to which participants are entitled.
The three primary forms of disclosure required by §§ 1021-25
are the summary plan description, summary annual report, and
individual benefits statement. The summary plan description
explains how the plan works. See 29 U.S.C. § 1022(a)(1) and ( b ) .
The summary annual report and individual benefits statements
provide participants with the figures needed to determine whether
the plan is working as it should. See Id. at §§ 1024(b)(3),
1023(b)(3)(A) & ( B ) , 1025(a). The administrator must provide
copies of these and other, secondary plan documents to
participants at various times throughout their participation in
the plan, as well as in response to a participant's written
request. Id. at § 1024(b). Assuming that the documents provided
are "sufficiently accurate and comprehensive" to apprise participants of their rights and obligations under the plan,5 see
§ 1022(a)(1), §§ 1201-25 impose no further disclosure obligations
on the administrator. Chambless v . Masters, Mates & Pilots
Pension, 571 F. Supp. 1430, 1456-57 (S.D.N.Y. 1983).
5 Sam separately alleges that any documents that Creare has provided are incomplete and misleading. As Sam bases this allegation on Creare's failure to respond to his requests for disclosure, it does not amount to a separate claim under §§ 1021-25.
8 Here, Sam alleges that Creare has failed to produce several
specific items in response to his written requests. Specifically,
he alleges that Creare has failed to produce: (1) an accounting
of any dividends received on the Creare stock that the trust
holds on his behalf, as well as any dividends declared or paid on
other Creare stock in the last 18 months; (2) the details of
Creare's profit-sharing plan for the 1992 fiscal year;
(3) Creare's financial statements from 1979 to present; (4) a
list of Creare's stockholders from 1979 to present; (5) the
dollar amount of the yearly profit-sharing pool from 1979 to
present; (6) yearly distribution percentages, including amounts,
from 1979 to present; and (7) records of all meetings and actions
taken by the trustees of the retirement plan since 1979.
Several of these requests may be disposed of summarily.
Neither §§ 1021-25 nor the federal regulations issued thereunder impose any separate requirement that plan participants be
furnished with records of the actions and meetings of their
plan's trustees, Chambless, 571 F. Supp. at 1456-57, with an
employer's financial statements, stockholder lists or dividend
records, Tortoro v . H.A. De Hart & Son, Inc., N o . Civ. A . 92-3449
(JEI), 1994 WL 114562, at *8 (D.N.J. Mar. 2 9 , 1994), or with
9 information relating to other participants.6 Chambless, 571 F.
Supp. at 1457. Similarly, employers are not required to include
these types of information in their summary plan descriptions,
summary or full annual reports, individual benefits statements or any of the other plan-related documents mentioned in §§1021-25.
Although the majority of Sam's specific requests exceed the
scope of ERISA's disclosure requirements, a genuine issue exists
as to whether Creare reasonably should have responded to Sam's
requests by providing him with a copy of the plan's 1992 annual
report and a statement of his accumulated benefits. Granted, Sam
did not specifically request that Creare produce these documents.
The sufficiency of a particular request, however, does not
necessarily turn on whether the participant expressly asks for a
document by name. Instead, the request will be adequate if it (i) actually requests that specified information be produced, see
Haberern v . Kaupp Vascular Surgeons Ltd., 24 F.3d 1491, 1505-06
(3d Cir. 1994); and (ii) judging from its content or the
employer's response, the employer knew or reasonably should have
known that the request could be answered by providing the
6 Another section of ERISA, § 1133, does provide for disclosure of information relating to the trustees' denial of a participant's request for benefits, but Sam does not claim that his request relates to this type of trustee action.
10 participant with one of the documents specified in §§ 1021-25.
See, e.g., Boone v . Leavenworth Anesthesia, Inc., 20 F.3d 1108,
1110-11 (10th Cir. 1994); Fisher v . Metropolitan Life Ins. Co.,
895 F.2d 1073, 1077 (5th Cir. 1990).
Here, Sam requested that Creare disclose the size of the
profit-sharing pool for fiscal year 1992 (which would presumably
be included in the plan's full annual report) and his accumulated
dividends and profit-share contributions (which are presumably
included in his benefits statement). Sam thus requested
information that Creare was required to disclose, albeit only in
the form of an annual report or individual benefits statement.
Moreover, the overall thrust of many of Sam's requests was to
obtain an itemization of Creare's contributions to the plan in
1992 and the amounts held in Sam's own benefits accounts.
Accordingly, a fact-finder could reasonably conclude that Creare should have responded to Sam's requests by providing him with a
copy of the plan's 1992 annual report and a statement of his
individual benefits. See Boone, 20 F.3d at 1110-11 (participant
about to be cashed out made sufficient request for benefits
statement by indicating that "she had never received an
accounting of her pension and profit sharing benefits and that
she was requesting 'at this time a full and accurate accounting
11 as to the income, expenses, assets and liabilities' of her employer"). I therefore cannot grant Creare's motion for summary judgment in its entirety.7
Finally, Creare's motion does not address Sam's allegations that, by failing to respond to Sam's requests, Creare breached
its fiduciary duty to "advise him of circumstances that threaten
his interests under the Plan" and to "refrain from non-disclosure
of . . . financial conditions, enhancements, and payments to
other adversely affecting the Trust." Several circuits have
recognized that an ERISA fiduciary's disclosure obligations are
"not limited to the dissemination of the documents and notices
specified in 29 U.S.C. sections 1021-31, but may in some
circumstances extend to additional disclosures where the
interests of the [participants] so require." Acosta v . Pacific Enterprises, 950 F.2d 6 1 1 , 618 (9th Cir. 1991). See also, e.g.,
7 In the alternative, Creare argues that it has provided Sam with a benefits statement and 1992 annual report during in the regular course of its administration of the retirement plan. Even assuming that this would be an adequate response to Sam's request, see Barrowclough v . Kidder, Peabody & Co., 752 F.2d 923, 933-34 (3d Cir. 1985), overruled on other grounds, Pritzker v . Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1111 (3d Cir. 1994), Sam denies receiving either of these two documents. Moreover, provision of these documents at best obviates the need for equitable relief. It does not shield Creare from § 1132(c)'s penalty provision.
12 Eddy v . Colonial Life Ins. Co., 919 F.2d 7 4 7 , 750 (D.C. Cir.
1990); Dellacava v . Painters Pension Fund, 851 F.2d 2 2 , 27 (2d
Cir. 1988). Specifically, a fiduciary has an affirmative duty to
comply with a beneficiary's reasonable requests for information
to the extent that these requests "relate to the provision of
benefits or the defrayment of expenses . . . [and] do not
contradict or supplant the existing reporting and disclosure
provisions." Acosta, 950 F.2d at 618. This duty encompasses a
duty to "advise [inquiring participants] of circumstances which
threaten interests relevant" to their benefits plan, including
the "fiduciary's knowledge of prejudicial acts by the employer. .
." Eddy, 919 F.2d at 750. In light of these holdings, Sam has
arguably stated a claim against Creare for breach of fiduciary
duty. As Creare has not addressed this claim in its present
motion, I do not scrutinize it here.
III. Conclusion
For the foregoing reasons, Creare's motion for summary
judgment is granted in part and denied in part. I will hold a
status conference at 9:00 a.m. on August 3 0 , 1994 to discuss
13 settlement possibilities and to set a trial schedule.
SO ORDERED.
Paul Barbadoro United States District Judge
August 1 9 , 1994
cc: John W . Mitchell, Esq. Thomas H . Richards, Esq.