Opinion
No: 00 CIV. 4598 (SAS)
August 21, 2002
John P. McConnell, Esq., Hargraves McConnell Costigan, P.C., New York, NY., Attorneys for Plaintiffs.
William F. Costigan, Esq., Costigan Company, P.C., New York, NY., Attorneys for Defendants.
OPINION AND ORDER
Brothers James and John McConnell, and their first cousin, Andrew Costigan, sued their former employer, Costigan Co., P.C. (the "Firm") and its principal William Costigan, alleging that the defendants owed them various monies pursuant to ERISA and state contract law. The majority of the claims have been dismissed or remanded to state court, see McConnell v. Costigan, No. 00 Civ. 4598, 2002 WL 313528, at *1 (S.D.N.Y. Feb. 28, 2002) ("McConnell I"); McConnell v. Costigan, No. 00 Civ. 4598, 2000 WL 1716273, at *1 (S.D.N.Y. Nov. 16, 2000); Costigan Co. v. Costigan et al., No. 00 Civ. 6143, 2000 WL 1693544, at *1 (S.D.N.Y. Nov. 13, 2000), or have settled. The remaining claim for penalties for failure to provide information pursuant to 29 U.S.C. § 1024(b), 1132(c), has been granted. See McConnell I, at *13-*14. Plaintiffs now move to impose the maximum per diem penalty of $100 per day for 782 days, per plaintiff, for a total of $234,600, to be paid immediately, with an additional amount accruing at the same rate for as long as defendants fail to provide the requested information.
William Costigan is Andrew Costigan's brother and the McConnell brothers' first cousin.
Familiarity with the underlying facts, and relevant procedural history, is assumed for the purposes of this motion.
Briefly, the Firm is the Administrator for a retirement plan (the "Plan"), in accordance with which the plaintiffs maintain accounts as former employees of the Firm. In May 1998, plaintiffs requested that the Plan Sponsor, the American Bar Retirement Association ("ABRA"), provide them with a comprehensive listing of the date and amount of each salary deferral, employer contribution and profit-sharing contribution, paid into to their retirement accounts. See Declaration of William Costigan in Opposition to Plaintiffs' Application for ERISA § 1024 Penalties ("Costigan Opp. Decl.") ¶ 2. ABRA responded promptly with the information plaintiffs sought. See 5/27/98 Letter from Lisa A. Marchionda, Operations Officer at ABRA, to James McConnell, Ex. B to Costigan Opp. Decl. On June 15, 1998, Andrew Costigan's employment ended; James and John McConnell stopped working at the Firm on November 15, 1998 and December 11, 1998, respectively. See Costigan Opp. Decl. ¶ 1
Defendants argue that because the Firm and not William Costigan is designated Plan Administrator under the Plan Document, the statutory obligation to provide information does not extend to defendant William Costigan. See Defendants' Memorandum in Opposition to Plaintiffs' Motion for Penalties ("Def. Opp.") at 6 n. 6. Plaintiffs do not disagree. of course, this may be a distinction without a difference to the extent that William Costigan is personally liable for the liabilities of his law firm.
June 1, 2000, each plaintiff wrote a letter requesting-salary deferral information from William Costigan about his retirement account. See 6/1/00 Letter from John P. McConnell to William Costigan ("6/1/00 Pl. Request"), Ex. D to Costigan Opp. Decl.; Costigan Opp. Decl. ¶ 3 (noting that the 6/1/00 letters from James McConnell and Andrew Costigan were identical to this letter). Because salary deferral and matching employer contributions were only made during plaintiffs' employment, much of the information that plaintiffs requested had already been provided by ABRA through May 22, 1998:
(i) the date on which each profit-sharing contribution was made to my account; (ii) the amount of each of those contributions; (iii) the date of each paycheck (not the pay period, but the actual date of the paycheck) from which pay was deferred for contribution to my account; (iv) the date on which each amount deferred from my paycheck for contribution to my account was actually paid to State Street; (v) the amount of each of those deferrals; and (vi) the date on which each of the firm's matching contributions for my account was paid to State Street [Bank]
6/1/00 Pl. Request Ltr. at 1. The letter continued:
Additionally, please provide me with copies of all Plan documents to which I am entitled by law, including, without limitation, detailed annual reports, Plan descriptions, and summaries of financial reports of the Plan, and all other documents filed by the Plan with the U.S. Department of Labor.
Id. at 1-2. On July 11, 2000, plaintiffs renewed this request. See 7/11/00 Letter from James McConnell to William Costigan, 7/11/00 Letter from John McConnell to W. Costigan, 7/11/00 Letter from Andrew Costigan to W. Costigan, Ex. J to 12/14/01 Declaration of John McConnell ("12/14/01 McConnell Decl.")
I. DISCUSSION
A. Statutory Duty to Provide Information
An "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." 29 U.S.C. § 1024(b)(4). If the Administrator fails to supply the requested information within thirty days, it may be "personally liable" to the participant in the amount of up to $100 per day from the date of such failure or refusal. 29 U.S.C. § 1132(c).
The penalty imposed for failure to supply requested information, as well as the decision whether to impose any penalty at all, lies within the discretion of the trial court. See 29 U.S.C. § 1132(c); Devlin v. Empire Blue Cross/Blue Shield, 274 F.3d 76, 90 (2d Cir. 2001). The following factors inform the exercise of that discretion: (1) the administrator's bad faith or intentional conduct; (2) the length of the delay; (3) the number of requests made; (4) the extent and importance of the documents withheld; and (5) the existence of any prejudice to the participant or beneficiary. See McDonald v. Pension Plan of the NYSA-ILA Pension Trust Fund, No. 99 Civ. 9054, 2001 WL 1154630, at *6 (S.D.N.Y. Oct. 1, 2001); Pagovich v. Moskowitz, 865 F. Supp. 130, 137 (S.D.N.Y. 1994)
While prejudice is a "significant factor," Austin v. Ford, No. 95 Civ. 3730, 1998 WL 88744, at *6 (S.D.N.Y. Mar. 2, 1998, and there is "no abuse of discretion" in denying penalties where prejudice is not shown, see, e.g., Demery v. Extebank Deferred Comp., 216 F.3d 283, 290 (2d Cir. 2000), virtually all appellate courts agree that a plan participant need not allege prejudice to be entitled to a statutory penalty. See, e.g., Sullivan v. Raytheon Co., 262 F.3d 41, 52 (1st Cir. 2001); Kerr v. Charles F. Vatterott Co., 184 F.3d 938, 948 (8th Cir. 1999); Sedlack v. Braswell Servs. Group, Inc., 134 F.3d 219 (4th Cir. 1998); see also Pagovich, 865 F. Supp. at 137-38 ("Every circuit which has squarely considered the issue has determined that prejudice or injury to a participant is not a prerequisite to the award of statutory penalties for the administrator's failure to disclose requested documents.") While "the law in this Circuit is not. yet clear on this point," the Second Circuit has noted with approval that other Circuits have held that neither prejudice nor bad faith is a prerequisite to an award of penalties pursuant to 29 U.s.c. §§ 1024(b)(4), 1132(c) Yoon v. Fordham Univ. Faculty and Admin. Ret. Plan, 263 F.3d 196 (2d Cir. 2001) (vacating district court's denial of penalties for failure to-provide information where such denial was based on the fact that no actual harm was shown, and remanding for reconsideration) (citing cases).
"[T]hat harm need not be shown [by a participant] is supported by the Supreme Court's statement that. 'Congress' [s] purpose in enacting the ERISA disclosure provisions was to ensure that the individual participant knows exactly where he stands with respect to the plan.'" Gillis v. Hoechst Celanese Corp., 4 F.3d 1137, 1148 (3d Cir. 1993) (quoting Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 118 (1989)). The "penalty was designed more to punish irresponsible ERISA administrators and fiduciaries than to compensate the pensioner for an actual loss." Scarso v. Briks, 909 F. Supp. 211, 215 (S.D.N.Y. 1996) (awarding penalties primarily because of the Administrator's bad faith in repeatedly refusing to provide requested plan documents) Otherwise stated, "the purpose of the penalty is to provide plan administrators with an incentive to timely respond to requests for documents." Kerr, 184 F.3d at 947-48 (reversing district court's denial of penalties, and remanding for reconsideration)
B. Analysis
Plaintiffs claim that defendants should be penalized for each day that they failed to provide the requested information. See McConnell I, 2002 WL 313528, at *13-14 (granting plaintiffs' motion for summary judgment on their section 1024 claim for penalties). What remains to be decided here is: (1) what information plaintiffs requested and when; (2) what information plaintiffs were entitled to; (3) of that information, what, if anything, defendants provided and when; (4) the amount of the monetary penalty per day; and (5) the total calculation.
On June 1, 2002, plaintiffs requested detailed information regarding salary deferrals and other contributions to their respective plans, as well as "all Plan documents . including, without limitation, detailed annual reports, Plan descriptions, and summaries of financial reports of the Plan, and all other documents filed by the Plan with the U.S. Department of Labor." 6/1/00 Pl. Request at 1-2. Whether plaintiffs have received all possible information regarding salary deferrals and other contributions to their respective retirement accounts is now moot because the Court has already ruled on those issues, see McConnell I, at *15, and the parties have reached an agreement as to those monies. See 6/13/02 Stipulation, Ex. A to 7/3/02 Declaration of James McConnell. Plaintiffs do not repeat their demand for this information in this round of briefing. of the remaining information plaintiffs requested, the statute only entitles plaintiffs to the latest updated summary plan description, a plan description, and the latest annual report. See 29 U.S.C. § 1024(b)(4).
At the time of plaintiffs' request in June 2000, the latest annual report would most likely have been the 1999 annual report. Plaintiffs failed to explain in their papers what other annual reports they have requested. The defendants are directed, in any event, to provide annual reports from 1999, 2000 and 2001.
Regarding the other items listed in plaintiffs' letter, the statute does not require that defendants provide plaintiffs with prior annual reports, "all documents filed with the Department of Labor," or "summaries of financial reports." 6/1/00 Pl. Request. Nor do plaintiffs provide authority for these requests.
While the defendant have given plaintiffs some of the requested documents including the plan description, they still have not provided either the latest summary plan description or the most recent annual report at the time of plaintiffs' request, the 1999 annual report — although they recently declared their intention to provide both. See Costigan Opp. Decl. ¶ 19 ("The Firm has obtained a summary plan description from ABRA and is providing that to the plaintiffs. The Firm is also bringing its Form 5500 filings with the Department of Labor current."). As of today, August 21, 2002, it has been 782 days since July 1, 2000, when the 30-day grace period, triggered by plaintiffs' June 1, 2000 request, ended.
An annual report in this context is the Form 5500 filed with the Department of Labor. See 29 C.F.R. § 301.6059-1 (a) (1996) ("the annual Return/Report of Employee Benefit Plan (Form 5500 series)"); McMahon v. Digital Eguip. Corp., 162 F.3d 28, 34 (1st Cir. 2001) (referring to Form 5500 as an "annual report" for employee benefit plan) . Defendants are required by ERISA, as well as the terms of the Plan, to file Form 5500 annually with the Department of Labor. On July 2, 2002, plaintiffs sent a representative to the Department of Labor in Washington, D.C., who reported back that, to date, Form 5500 filings had been made only with respect to 1991, 1992, 1993, and 1996. See 7/2/02 Affidavit of Kirby Lee, Employee Benefits Specialist at Judy Diamond Assocs., Inc., Ex. A to 8/7/02 Declaration of James D. McConnell, Jr.
As noted in the earlier opinion, plaintiffs did not waive their right to statutory penalties by filing suit on June 21, 2000, only twenty days after requesting the information, because the original complaint did not contain a claim for section 1024 penalties. See McConnell I, at *13. Nevertheless, plaintiffs' quickness to sue is evidence that they did not request the information entirely in good faith. See, e.g., Stenke v. Ouanex Corp., 759 F. Supp. 1244, 1248 (E.D. Mich. 1991) (assessing only one dollar per day despite defendants' intransigence," in part because plaintiff had "not acted entirely in good faith"); Pollock v. Castrovinci, 476 F. Supp. 606, 618 (S.D.N.Y. 1979) (declining to impose sanctions where plaintiff "was not proceeding entirely in good faith") . In fact, the plaintiffs had already received from ABRA much of the information they sought from Costigan; it is no secret that the plaintiffs were not prejudiced by defendants' failure to give them the requested information. Indeed, they make no attempt to argue that they were. Nor have plaintiffs explained why they did not seek the additional information from ABRA.
On the other hand, the Firm's tenure as Plan Administrator has been characterized by utter disregard of the office and its attendant responsibilities under ERISA. See McConnell I, at *12-*14. Until very recently, Costigan has stubbornly refused over a period of two years to make any attempt to provide-plaintiffs with the requested information. He has invented every excuse for his misbehavior, including that he lost some plan-related documents when the Firm relocated in 1999. See Costigan Opp. Decl. ¶ 12 n. 3 (complaining that Magistrate Judge Katz sanctioned defendants "for failing to produce documents they did not have," and attempting to explain that he simply "didn't know where they [were]" after the move)
At one point during the litigation, Costigan claimed that it was the responsibility of ABRA, not the Firm, to file annual reports and prepare summary plan descriptions. See McConnell I, at *5 (citing Defendants' Response to Interrogatories, Ex. K to 12/14/01 McConnell Decl., ¶¶ 10-11). He made this argument despite the clear language of the statute and the Plan itself. See 29 U.S.C. § 1024(b)(4) ("The administrator shall, upon request . . . furnish a copy of the latest updated summary plan description, plan description, and the latest annual report . . ."); 6/28/94 ABRA Plan § VIII, Ex. G to 12/14/01 McConnell Decl. ("The Firm will act as a Plan Administrator . . . ."). Costigan even attempts to rationalize his failure to provide a summary plan description by questioning why plaintiffs would need a summary when they have all of the underlying information. See Def. Opp. at 11. This ignores common sense — summaries are often far more useful than reams of underlying information, which is likely the reason why section 1024 expressly requires that a recent updated summary be provided upon request. See 29 U.S.C. § 1024(b)(4) ("shall . . . furnish a copy of the latest updated summary plan description") (emphasis supplied). Congress clearly has more credibility than William Costigan when it comes to the best interests of retirement plan participants.
Weighing the defendants' bad faith and contempt for important duties under ERISA, with the plaintiffs' ulterior motives and lack of prejudice, I conclude that the maximum sanction of $100 per day is inappropriate. A more fitting sanction is a penalty of $10 per day for 782 days. The penalty is subject to increase at a rate of $100 per day, however, if the Firm fails to provide an updated summary plan description and the 1999-2001 annual reports within twenty (20) days of the receipt of this Opinion and Order.
Defendants need only provide the 2001 annual report if and when it is prepared.
4. Total Calculation
Penalties for failure "to comply with a request for information" are "available with respect to any single participant or beneficiary . . . ." Wright v. Hanna Steel Corp., 270 F.3d 1336, 1344-45 n. 13 (11th Cir. 2001) (citing 29 U.S.C. § 1132(c)(1)) . Section 1132(c)(1) provides that "each violation described in subparagraph (B) with respect to any single participant, shall be treated as a separate violation." 29 U.S.C. § 1132(c)(1). Because it is within this Court's discretion-whether to apply any penalty at all, see Devlin, 274 F.3d at 90, the Court also has the discretion to assess a penalty per participant, per document, or simply per day. See, e.g., Bartling et al. v. Fruchauf Corp., 29 F.3d 1062, 1068-69 (6th Cir. 1994) (affirming district court's award of a single penalty per day, and rejecting plaintiffs' arguments that the statute required the district court to assess a separate penalty per plaintiff, for 78 plaintiffs, because whether to assess any penalty is wholly discretionary).
Subparagraph (B) provides that "[a]ny administrator 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 . . . may in the court's discretion be personally liable to such participant or beneficiary in the amount of up to $100 per day . . ." 29 U.S.C. § 1132(c)(1).
Here, James McConnell, John McConnell and Andrew Costigan seek penalties for failure to provide information to each of them. Yet, they have consistently acted as a single group throughout this litigation. Thus, I will impose a single penalty of $10 per day for 782 days, for a total of $7,820. This result is no different" than if this Court were to sanction defendants $2,606.67 "per plaintiff," rather than $7,820 "to be split [among] the plaintiffs." Bartling, 29 F.3d at 1069 (making this observation to illustrate that the statute does not mandate assessing the penalty on a per-plaintiff basis).
III. CONCLUSION
Defendants must provide plaintiffs with: (1) the most recent summary plan description; (2) the most recent updated summary plan description as of plaintiffs' first request on June 1,2000; (3) annual reports for the years 1999 and 2000; and (4) the annual report for 2001 when/if it is available. The Firm is further ordered to pay, within ten (10) days of entry of judgment, a sum of $7,820 to be divided equally among the plaintiffs. Defendants are also directed to pay into the plaintiffs' individual 401(k) accounts, if they have not already done so, the amounts set forth in the parties' June 13, 2002 stipulation regarding late deferrals and other contributions. Plaintiffs are instructed to provide the Court with a proposed order for judgment in accordance with this opinion no later than twenty (20) days from the receipt of this Order.