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Imposing a fine of $20 per day
Summary of this case from Sunderlin v. First Reliance Standard Life Ins. Co.Opinion
No. 92 Civ. 8700 (CSH).
August 22, 2001
MEMORANDUM OPINION AND ORDER
In its present posture, this much-litigated case brought under the Employee Retirement Income Security Act of 1974 ("ERISA" or the "Act"), 29 U.S.C. § 1001 et seq., requires the Court to decide whether plaintiff is entitled to recover from defendant statutory penalties authorized by section 502(c) of ERISA, 29 U.S.C. § 1132 (c); and, if so, in what amount.
I. BACKGROUND
This Court has written five previous opinions in this case, brought by plaintiff Deanne Proujansky against defendant Harriet Blau. The complaint named other defendants, but they are not involved in the present disputes. Those opinions are reported at 1995 WL 338415 (June 7, 1995) (Proujansky I) 1998 WL 157022 (Apr. 3, 1998) (Proujanskv II) 1999 WL 124457 (Mar. 8, 1999) (Proujansky III); 2000 WL 98382 (Jan. 28, 2000) (Proujansky IV) and 2000 WL 217488 (Feb. 23, 2000) (Proujansky V).
Familiarity with those opinions is assumed. They set forth in detail the factual background of the case and the Court's prior rulings. This opinion revisits those subjects only to the extent necessary to resolve the present issues.
Proujansky brought this ERISA action against Blau, alleging that Blau had wrongfully transferred money from the pension plan of the Lowell School (the "Lowell Plan") to the pension plan of the Little Meadows Early Childhood Center (the "Pre-School Plan"). Proujansky is the executive director of the Lowell School and a trustee of and participant in the Lowell Plan. Proujansky began teaching at the Lowell School in 1974, rising to assistant principal in 1974 and then to principal in 1981. Blau is the former executive director of the Lowell School and at the pertinent times was its sole stockholder. In 1989 Blau sold all the stock of the Lowell School to Proujansky, intending to devote her entire attention to the Pre-School.
In 1972 Blau established the Lowell Plan for the benefit of Lowell School employees. Blau reached retirement status under the Plan's terms and stopped accruing further Plan benefits, but remained as a Lowell Plan trustee. In 1986 Blau established the Pre-School Plan for the benefit of employees of the Pre-School. Blau was not a participant in the Pre-School Plan, but was a trustee.
Originally the assets of the Lowell Plan and the Pre-School Plan had been commingled in the same securities accounts. In 1988 or 1989 — the record is not clear on the point but the difference is not material — Blau segregated the accounts, transferring certain assets from the Lowell Plan accounts to accounts in the name of the Pre-School Plan.
It is apparent that during the negotiations for the sale of the Lowell School by Blau to Proujansky, the commingling of the two Plans' assets was made known to Proujansky. The sale closing statement, dated July 18, 1989, contained as an exhibit a letter bearing that date from Blau to Proujansky which read in full:
This is to confirm that I am the sole trustee of the Lowell School, Inc./The Lowell Early Childhood Center Pension Plan. Within thirty days, I will take all steps necessary to divide the existing pension fund between the two entities. At that time I will resign as trustee of the portion of the pension fund attributable to Lowell School, Inc.
No changes in investments will take place in the fund prior to such division without the prior consent of the Buyer, Deanne Proujansky.
The July 18, 1989 date of Blau's letter expressing an intention to divide the two Plans' assets at a future time is puzzling, since the litigation seems to have established that Blau transferred assets from the Lowell Plan to the Pre-School Plan in 1988. See Proujansky II 1998 WL 157022 at *2 n. 2 ("While Proujansky first asserted a wrongful transfer occurred in 1989, the parties now seem to agree that the contested transfer occurred in 1988") (citing to parties' briefs). However, documents furnished by Blau to Proujansky in November 1955, discussed infra and referred to as "the Supplemental Accounting," seem to indicate that the inter-plan transfer of assets occurred during the Lowell Plan's fiscal year July 1, 1989-March 31, 1990. While in prior opinions I have referred to this event as "the 1988 transfer of assets," in this opinion I will content myself with the phrases "transfer of assets" or "assets transfer." The discrepancy as to timing makes no difference to the resolution of the present issues. In any event, Myron Proujansky ("Myron"), an uncle of plaintiff Deanne Proujansky who was rendering fiscal support and familial advice to his niece, sent Blau a letter dated August 1, 1989. According to Myron's letter, Blau had told him in a telephone conversation the day before that "the funds applicable to the Lowell School, Inc. Fund" were invested in five Shearson investment funds and had a total value of $525,783. Myron wrote to Blau in pertinent part:
[W]e must have an accounting showing the total valuation of all investments in the "Fund" and a breakdown of the total valuation applicable to Lowell School, Inc., personnel and Lowell Early Childhood personnel. After this determination of dollar valuation to each of the entities the aforementioned funds can be transferred to the Lowell School Inc. Pension Fund or the reverse — the other securities transferred to the Lowell Early Childhood — if the trust is in the name of Lowell School Inc.
Blau responded to Myron in a two-page handwritten note dated August 10, 1989 which did not answer the questions Myron had asked. Subsequently various lawyers retained by Proujansky wrote to Blau or her actuary, asking for details concerning the segregation of assets between the two Plans. See, e.g. letter dated November 22, 1989 from David A. Dubow, Esq., then counsel for Proujansky, at 1 ("As you are undoubtedly aware, the division of the pension fund and your obligations thereto are matters which need immediate resolution. It appears that prior efforts to resolve this matter have thus far been unsuccessful."). In Proujansky's view, Blau never furnished adequate details. Accordingly Proujansky filed this action in December 1992.
Proujansky's complaint contained seven counts. Specifically, Count I alleged that Blau and other defendants (whom I need not consider in this Opinion) failed to comply with their fiduciary duty to furnish information to Proujansky, a participant in the Lowell School Plan, in violation of sections 101(a) and 104(b)(4) of ERISA, 29 U.S.C. § 1021 (a) and 1024(b)(4), thereby subjecting Blau to a statutory penalty under section 502(c), 29 U.S.C. § 1132 (c). While Count I did not explicitly refer to the transfer of assets between the two Plans, that event clearly triggered the entire complaint, as is manifested by Counts II through VII, charging violations of various ERISA provisions, and each alleging that by reason of the transfer, "the Lowell Pre-School Plan is in possession of assets properly belonging to the Lowell School Plan and its participants," with the result that the Lowell Plan was underfunded. See Proujansky IV, 2000 WL 98382 at *1.
Count I of Proujansky's complaint prayed for an order directing Blau, as trustee of the Lowell Plan, "to render accountings of her transactions on behalf of the Lowell School Plan for the Plan Years ending June 30, 1985 through June 30, 1989, and of her transactions during the Plan Year commencing June 1, 1989 until the date Blau tendered her resignation as Trustee in February 1990." See Proujansky I. 1995 WL 338415 at *5. Plaintiff succeeded on that aspect of the case. In Proujansky I. I granted Proujansky "summary judgment for the equitable relief prayed for in her notice of motion," namely, an accounting.
The Supplemental Accounting indicates that the Lowell Plan's fiscal year was in fact from July 1 through June 30.
The Opinion and Order in Proujansky I was dated June 7, 1995. Blau provided an accounting to Proujansky on August 18, 1995. Proujansky and her advisers, legal and actuarial, protested that this accounting was inadequate. Blau and her advisers, legal and actuarial, insisted that it was sufficient. Counsel exchanged letters of increasing stridency. I referred the matter to then Magistrate Judge Sharon Grubin. On November 22, 1995, under Judge Grubin's effective supervision, Blau delivered a "Supplemental Account," so styled by Blau and her counsel; these are the documents I will refer to as the Supplemental Accounting. They appear in the record as Exhibit K to the affidavit of David Weinstock, Proujansky's expert actuarial witness.
Counsel for Blau delivered to Proujansky the accounting for the 1984-1985 fiscal year in December 1995. This accounting does not appear in Exhibit K.
The Supplemental Accounting consisted of a substantial number of documents, covering the period June 30, 1985 through March 31, 1990 and organized by fiscal years. The Lowell Plan's fiscal year began on July 1 and ended on June 30. The Supplemental Accounting for each year consisted of a two-page summary and a number of supporting schedules, typically running to about 25 pages. The fiscal year of the most immediate relevance to the case at bar is 1989-1990. Schedule D to the accounting for that year gave the details of transfers of shares, cash, and certificates of deposit from the Lowell Plan to the Pre-School Plan effected on August 18, 21, 22, 23, and 28, and September 21, 1989. Those transfers totaled $725,577.86. According to the summary for that year, a total of $87,594.11 was distributed to Lowell Plan beneficiaries. Thus withdrawals from the Lowell Plan during that fiscal year totaled $813,171.97, leaving a balance of $547,984.66 in the Lowell Plan as of March 31, 1990, as stated in the summary for the period July 1, 1989 through March 31, 1990 and Schedule F accompanying that summary.
The last date covered by the Supplemental Accounting, March 31, 1990, reflects the date of Blau's resignation as a trustee of the Lowell Plan.
The record makes it plain that the inter-Plan transfer of assets could not be fully comprehended until Blau made the Supplemental Accounting. It is no coincidence that the expert witnesses for both parties reviewed the Supplemental Accounting before forming their opinions with respect to the economic consequences of the assets transfer. See Proujansky III 1999 WL 124457 at *1 ("[T]he first question addressed by the expert witnesses was the proper calculation of Blau's Unrestricted and Restricted Benefits. Both experts examined Blau's Supplemental Accounting, eventually and belatedly furnished as a result of this action.").
Throughout the litigation, and again during her submissions on the present issue, Blau has insisted that adequate disclosure was made in response to Proujansky's earlier requests, or that the information in question was readily available to Proujansky through other sources. The latter contention is an empty one, since ERISA places a non-delegable duty of disclosure squarely upon a plan administrator. As for the adequacy of Blau's earlier disclosures under the Lowell Plan, that issue has been resolved against her, see Proujansky I, 1995 WL 338415 at *5 of greater pertinence to this Opinion, the subsequently furnished Supplemental Accounting makes the adequacies of the earlier disclosures manifest under ERISA. See infra Part II.B.
Both expert witnesses, David B. Weinstock for Proujansky and Glenn A. Rossman for Blau, testified before the Court at an evidentiary hearing. The purpose of the hearing was to determine if, as a result of the transfer of assets, Blau and the Pre-School Plan owed any amount to the Lowell Plan and, if so, how much. In Proujansky IV, I held, for the reasons stated therein and not necessary to repeat here, that "defendants are not liable to plaintiff for any damages arising out of the 1988 transfer of assets from the Lowell Plan to the Pre-School Plan." Id. at *12. Accordingly the Court dismissed Counts II through VII of the complaint. In Proujansky IV. I concluded by saying:
The remaining claim is that contained in Count I, for defendants' failure to make timely accountings as required by ERISA. Plaintiff prevailed on the merits of that claim in Proujansky I. She now claims damages under the formula contained in ERISA section 502(c), 29 U.S.C. § 1132 (c).Id.
No further evidentiary hearing was necessary for the resolution of that claim. Instead, the parties have made voluminous additional (and in some instances repetitive) written submissions. The question is now ripe for decision.
II. DISCUSSION
A. Reporting and Disclosure Requirements Imposed by ERISA
ERISA imposes upon the administrators of employee benefit plans certain reporting and disclosure requirements. The relevant provisions are codified at 29 U.S.C. § 1021-1031.
Section 1021(a) refers to the documents and information that a plan administrator must furnish to plan participants and beneficiaries. Section 1021(b) specifies the documents that a plan administrator must file with the United States Secretary of Labor. The case at bar is concerned with § 1021(a) and subsequent sections providing for disclosure to participants and beneficiaries.
§ 1021(a) provides:
The administrator of each employee benefit plan shall cause to be furnished in accordance with section 1024(b) of this title to each participant covered under the plan and to each beneficiary who is receiving benefits under the plan —
(1) a summary plan description described in section 1022(a)(1) of this title; and
(2) the information described in sections 1024(b)(3) and 1025(a) and (c) of this title.
§ 1021(a)(2), cast in general terms, incorporates by reference §§ 1024(b)(3) and 1025(a) and (c), which describe in somewhat greater detail the "information" that plan administrators must make available to plan participants and beneficiaries.
Section 1024(b)(3) provides:
Within 210 days after the close of the fiscal year of the plan, the administrator shall furnish to each participant, and to each beneficiary receiving benefits under the plan, a copy of the statements and schedules, for such fiscal year, described in subparagraphs (A) and (B) of section 1023(b)(3) of this title and such other material (including the percentage determined under section 1023(d)(11) of this title) as is necessary to fairly summarize the latest annual report.
While § 1021(a)(2) does not specifically refer to § 1024(b)(4), the first sentence of § 1021(a) contains a broader reference to § 1024(b); and courts, seeking to divine ERISA's disclosure requirements from this sometimes Delphic statute, also look to § 1024(b)(4).
Section 1021(b)(4) provides in pertinent part:
The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary 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.
Section 1021(a)(2) also incorporates by reference § 1025(a) and (c).
Section 1025(a) provides:
Each administrator of an employee pension benefit plan shall furnish to any plan participant or beneficiary who so requests in writing, a statement indicating, on the basis of the latest available information —
(1) the total benefits accrued, and
(2) the nonforfeitable pension benefits, if any, which have accrued, or the earliest dates on which benefits will become nonforfeitable.
Section 1025(c) requires plan administrators to furnish participants with individual statements "setting forth information in administrator's Internal Revenue registration statement and notification of forfeitable benefits." This subsection, keyed in to provisions of the Internal Revenue Code, is not implicated in the case at bar, and so I do not quote it in full.
Liability for failure to comply with ERISA's disclosure requirements is provided by section 502(c)(1), 29 U.S.C. § 1132 (c)(1), which provides in pertinent part:
Any 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 (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within thirty 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.
Proujansky relies upon this provision in seeking to hold Blau liable for delay in furnishing requested information about the Lowell Plan to Proujansky.
B. Applicability of ERISA Disclosure Requirements to this Case
Liability for statutory damages under 29 U.S.C. § 1132 (c)(1) is established when (1) a participant in a plan covered by ERISA (2) requests the plan administrator in writing to furnish information or documents (3) in the administrator's control that (4) ERISA requires the administrator to furnish and (5) the administrator fails or refuses to make the requested disclosure.
In the case at bar, only the fourth element is at issue. Proujansky was a participant in the Lowell School Plan, to which ERISA applied; Blau was the plan administrator; Proujansky requested Blau in writing to disclose accounting information with respect to the transfer of assets; and Blau failed or refused to make full disclosure until November 1995, when she furnished the Supplemental Accounting during the proceedings before Judge Grubin. Accordingly the case turns upon whether ERISA mandated the disclosure of the information Proujansky requested.
Count I of Proujansky's complaint alleged in two paragraphs that Blau violated the disclosure requirements of ERISA. ¶ 30 alleged that Blau "failed to comply with [her] fiduciary duty to furnish information to Proujansky, a participant in the Lowell School Inc. Plan, as required by ERISA § 101(a), 29 U.S.C. § 1021 (a)." ¶ 32 alleged that Blau "failed to comply with [her] fiduciary duty to furnish information to Proujansky, a participant in the Lowell School Inc. Plan, as required by ERISA § 104(b)(4), 29 U.S.C. § 1024 (b)."
Blau's actuary, Morris J. Silberstein, and Silberstein's company, Pensions and Forecasting Co., Inc., were also named as defendants. Proujansky has dropped her claims against them.
Blau makes two threshold arguments with respect to the disclosure requirements of ERISA. First, she contends that ERISA is not implicated at all because the Court's granting relief to Proujansky on Count I of the complaint in Proujansky I was based solely upon provisions in the Lowell Plan. Second, by concentrating her briefs solely upon § 1024(b), Blau appears to contend that the only ERISA provision Proujansky invoked was § 1024(b), from which premise Blau argues that the Supplemental Accounting does not come within the sort of documents that section mandates plan administrators to disclose. Neither argument persuades.
First, while the opinion in Proujansky I made specific reference to Proujansky's reliance upon ERISA, it is also fair to say that I derived Blau's duty to make further disclosure principally from Article XI, § 11.09 of the Lowell Plan; See 1995 WL 338415 at *5. However,Proujansky I cannot be read as a holding by the Court that the ERISA disclosure requirements do not apply to the information Proujansky sought. Blau did not make that argument in resisting the accounting Proujansky demanded, and so the issue was not before me. In any event, I think it clear that neither the Lowell Plan disclosure provisions nor this Court's reference to them in Proujansky I could operate to nullified ERISA's disclosure requirements, which apply to the Plan ex proprio vigore. Moreover, Proujansky cited ERISA as the source of the relief requested in Count I of her complaint.
Second, Count I of Proujansky's complaint cannot fairly be read to limit her invocation of ERISA to § 1024(b)(4). In ¶ 30 of the complaint Proujansky charged Blau with breaching the disclosure requirements imposed by § 1021(a). § 1021(a)(2) obligates plan administrators to furnish participants with "the information described in sections 1024(b)(3) and 1025(a) and (c) of this title." Accordingly Blau's conduct must also be measured against the requirements of those ERISA sections.
However, Blau is correct in her contention that § 1024(b)(4) did not require Blau to furnish Proujansky with the information that ultimately took the form of the Supplemental Accounting. That conclusion is compelled by the Second Circuit's decision in Board of Trustees of the CWA/ITU Negotiated Pension Plan v. Weinstein, 107 F.3d 139 (2d Cir. 1997). Weinstein, a participant in a pension plan, "concerned that improper allocations of pension-plan contributions might be reducing the pension benefits payable to Plan participants," wrote to the administrators "requesting copies of the Plan's annual reports and actuarial valuation reports for the years 1992 through 1994." 107 F.3d at 140. The administrators supplied copies of the annual reports but refused to furnish the actuarial valuation reports, and sought a declaratory judgment that ERISA did not require such disclosure. Weinstein counterclaimed, seeking disclosure of the reports and alleging that the administrators' refusal to supply him with copies breached both their disclosure obligation under § 1024(b)(4) and their fiduciary duties under ERISA § 404(a)(1), 29 U.S.C. § 1104 (a)(1). Weinstein also sought monetary penalties under 29 U.S.C. § 1132 (c)(1). Judge Batts granted the administrators' prayer for declaratory relief and dismissed Weinstein's counterclaim. The Second Circuit affirmed.
In Weinstein the court of appeals focused upon the language in § 1024(b)(4) requiring disclosure of certain specified documents "or other instruments under which the plan is established or operated," and reasoned that the disclosure required by the section is limited to a plan's "governing documents," 107 F.3d at 144, a classification that did not include the actuarial valuation reports at issue. Consequently, the Second Circuit concluded, "the district court correctly ruled that actuarial valuation reports are not governing documents and hence are not instruments under which a plan is established or operated." Id. at 146. The court acknowledged that the actuarial valuation reports "doubtless contain plan information that plan participants might find interesting or useful," id. at 145, but this made no difference: Had Congress meant to require unlimited disclosure, or even disclosure of all documents that would be useful to plan participants, it would not have used the restrictive "instruments under which language" Id. at 146. Nor did Weinstein fare any better by appealing to the general fiduciary duties of loyalty and prudence ERISA articulates in 29 U.S.C. § 1104 (a)(1); on that score, the Second Circuit said:
Since we have concluded that Congress intentionally fashioned § 104(b)(4) [ 29 U.S.C. § 1024 (b)(4)] to limit the categories of documents that administrators must disclose on demand of plan participants, we think it inappropriate to infer an unlimited disclosure obligation on the basis of general provisions that say nothing about disclosure.Id. at 147.
In the case at bar, I am bound by the Second Circuit's ruling and rationale in Weinstein to hold that the supplemental accounting documents generated by the transfer of assets in this case do not fall within the "governing documents" § 1024(b)(4) requires a plan administrator to furnish upon a participant's request. Because § 1024(b)(4) did not require Blau to furnish these documents to Proujansky, the section does not furnish a basis for levying statutory damages against Blau for nondisclosure under § 1132(c)(1).
However, it is equally significant to note that § 1024(b)(4) was the only ERISA disclosure section upon which the plan participant inWeinstein relied. Accordingly that was the only disclosure section the Second Circuit had occasion to consider. In the case at bar, Proujansky's complaint must be read to embrace potential claims under additional ERISA disclosure sections: §§ 1024(b)(3), 1025(a), and 1025(c). As to the reach and effect of those sections, the Second Circuit's opinion inWeinstein says nothing. I consider them now.
I do not think that § 1024(b)(3) assists Proujansky in her effort to hold Blau liable for statutory damages under § 1132(c)(1). § 1024(b)(3) requires a plan administrator to furnish participants with certain statements and schedules "[w]ithin 210 days after the close of the fiscal year of the plan . . ." Out of that provision and the other ERISA sections incorporated by reference in § 1024(b)(3), Proujansky's reply brief at 23-26 fashions a not implausible theory that Blau was obligated to reveal particulars of the assets transfer earlier than she did. However, § 1132(c)(1) creates a potential liability for damages on the part of a plan 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 . . . by mailing the material requested to the last known address of the requesting participant or beneficiary within thirty days after the request . . ." (emphasis added). Congress specifically limited an administrator's personal liability to a participant to a situation where the administrator failed or refused to furnish information a participant requested in writing. Construing § 1132(c)(1) with the caution dictated by the Second Circuit's rationale in Weinstein, I am not prepared to extend that carefully crafted statutory liability to information which the administrator was arguably obligated to supply without any request. Proujansky does not cite any case awarding statutory damages to a participant under § 1132(c)(1) for an administrator's failure to comply with § 1024(b)(3). Additionally, I do not read Myron Proujansky's letter to Blau dated August 1, 1989, as sufficiently broad to encompass the sort of information described in § 1024(b)(3) and the other sections it incorporates by reference.
This brings the analysis to § 1025(a), upon which Proujansky also relies. Information falling within this section must be furnished by a plan administrator "to any plan participant or beneficiary who so requests in writing." Accordingly a potential liability for nondisclosure under § 1132(c)(1) is squarely implicated.
Unlike § 1024(a)(1), which applies to "any benefit plan" subject to ERISA, § 1025(a) focuses upon "an employee pension benefit plan" such as the Lowell School Plan. That subsection requires the administrator of an employee pension benefit plan to "furnish any plan participant or beneficiary who so requests in writing, a statement indicating, on the basis of the latest available information — (1) the total benefits accrued, and (2) the nonforfeitable benefits, if any, which have accrued, or the earliest date on which benefits will become nonforfeitable."
One district court, writing in 1994, reviewed the caselaw existing at that time and observed:
These cases provide little, if any, guidance on what particular information a pension plan participant or beneficiary may request. . . . Quite simply, these cases do not describe with particularity what information is required to be disclosed under 29 U.S.C. § 1024, 1025 and 1132. . . . [T]here is relatively no case law explaining what information an administrator is required to provide upon written request under ERISA.Maiuro v. Federal Express Corporation, 843 F. Supp. 935, 940 (D.N.J.) (Gerry, Chief Judge) aff'd without opinion, 43 F.3d 1461 (3d. Cir. 1994).
In Weinstein the Second Circuit explained an administrator's limited obligations under § 1024(b), which for the reasons stated did not require disclosure of the information contained in Blau's Supplemental Accounting. But the Second Circuit does not appear to have articulated a comparable analysis of what § 1025(a) requires an administrator to provide in response to a pension plan participant's written request; as we have seen, Weinstein dealt only with § 1024(b)(4).
In Maiuro, Chief Judge Gerry fashioned a formula for disclosure which I find persuasive. He stated at 843 F. Supp. 942:
[W]e suggest that the requested material must be provided if it:
1) Is of such a character that would directly assist the requesting party in determining what his or her rights are under the pension plan; or
2) Will directly assist the requesting party in determining where he or she stands (eligibility) with respect to the plan; or
3) Will directly assist the requesting party in determining the extent of his or her interest (monetary) in the plan.
At least one district court in this circuit has adopted the Maiuro formulation. Judge Larimer quoted it approvingly in Roeder v. General Signal Corporation, 901 F. Supp. 124, 127 (W.D.N.Y.), and went on to say:
This formulation was adopted in light of the stated objectives for ERISA. ERISA was enacted to 'promote the interests of employees and their beneficiaries in employee benefit plans,' Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983), and "to protect contractually defined benefits," Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. [134], at 148 (1985). Maiuro, supra at 941. "ERISA's legislative history makes clear that Congress intended the information-producing provisions to enable claimants to make their own decisions on how best to enforce their rights." Maiuro, supra. at 941. See S.Rep. 93-127, 93d Cong. 1st Sess. at 27. "Congress' purpose in enacting the ERISA disclosure provision was to ensure that the individual participant knows exactly where he stands with respect to the plan." Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 118 (1989).
(alternative citations omitted).
In Maiuro a retired employee, who had participated in several plans during his employment, requested information regarding the calculation of his monthly benefit payment, including the total amounts that were credited to him under the several pension plans, and how those figures were calculated. Maiuro held that § 1025(a) required the administrator to furnish that information.
In Roeder, a plan participant requested information concerning his pension benefits based on several retirement dates. Judge Larimer held that § 1025(a) required the administrator to comply with the participants's request, which "would necessarily include information about his benefits which had already accrued on the date of the request," information that "is necessary for employees to make intelligent and informed decisions regarding their benefits and their options as they near retirement." 901 F. Supp. at 127.
A broad interpretation of § 1025(a)'s disclosure requirements is generally supported by caselaw. In addition to the cases cited supra, inHaberern v. Kaupp Vascular Surgeons Ltd. Defined Benefit Plan and Trust Agreement, 822 F. Supp. 247 (E.D. Pa.), rev'd. on other grounds 24 F.3d 1491 (3d Cir. 1994), the district court held that § 1025(a) required a plan administrator to furnish a participant with "an explanation and accompanying calculations to support the amount of the July 9, 1987 check to Plaintiff in the amount of $42,986.24 which represented Plaintiffs benefits under the Death Benefit Plan." 822 F. Supp. at 263-64. The district court reasoned:
While section 1025(a) states only that an administrator must provide a statement stating the total benefits accrued, this provision should be interpreted broadly to accommodate a plan participant's request that the administrator provide the computations to support the amount stated.Id. at 264.
The Third Circuit reversed the district court in Haberern because it did not regard a letter from the beneficiary's attorney to the plan administrator as a written request sufficient to trigger ERISA disclosure. The court of appeals said:
. . . Haberern's attorney's letter cannot be regarded as a statutory request for an explanation of Haberern's benefits within those [ERISA] sections. Haberern's attorney's letter requested only that a meeting be scheduled. While the letter complained that certain materials had not been supplied, it never requested that they be supplied. In these circumstances, we cannot understand how this letter could be construed as a written request under section 105(a), 29 U.S.C. § 1025 (a).24 F.3d at 1505-06 (footnote omitted). The Third Circuit did not disturb the district court's holding that § 1025(a) required the administrator to disclose the accounting calculations, had the written request for that information been adequate. In the case at bar, Myron Proujansky's August 1, 1989 to Blau satisfies all the criteria of a written request under ERISA.
One circuit has held that adequate disclosure under § 1025(a) may require an administrator to create documents that did not previously exist. In Cline v. The Industrial Maintenance Engineering Contracting Co., 200 F.3d 1223, 1234 (9th Cir. 2000), the Ninth Circuit held: (citation, internal quotation marks, ellipses and brackets omitted). This rationale applies to Blau's obligation to prepare and furnish the Supplemental Accounting, even if no such document existed at the time of Proujansky's request for such information.
We do not concur in the District Court's holding that there was no ERISA liability for failure to furnish nonexistent documents. . . . If any of these documents do not exist at the time of the request, it is consistent with the aims of ERISA to impose a penalty on the plan administrator because there is nothing keeping the administrator from preparing a mandatory document where none previously existed, and it is his burden upon threat of penalty to do so.
Applying these formulations and principles to the case at bar, I conclude without difficulty that ERISA, 29 U.S.C. § 1025 (a), required Blau to respond to Myron Proujansky's August 1, 1989 request by furnishing the accounting details underlying the transfer of assets from the Lowell Plan to the Pre-School Plan: details that were not furnished until Blau provided the Supplemental Accounting in November 1995. The Supplemental Accounting revealed that Blau had withdrawn from the Lowell Plan more assets than she was entitled to at the time, leaving the Lowell Plan underfunded and placing Proujansky, as new owner of the Lowell School and trustee of its Plan, m the position of having to obtain IRS approval to freeze the Plan.
ERISA did not entitle Proujansky to this information in her capacities as buyer of the Lowell School or trustee of its Plan; the Act exists for the protection of benefit plan participants and beneficiaries. But Proujansky was a participant of the Lowell Plan, and the information contained in the Supplemental Accounting, if timely furnished by Blau, would have been of obvious value to Proujansky in "protect[ing] contractually defined benefits, 'enabling her' to make [her] own decisions on how best to enforce [her] rights," and ensuring that she "knows exactly where [she] stands with respect to the plan," the ERISA objectives summarized in Maiuro and Roeder. Given her seniority at the Lowell School, Proujansky was a significant participant in and potential beneficiary of the Lowell Plan. Proujansky would naturally be interested, if not dismayed, to learn that Blau's excessive transfer of assets to the Pre-School Plan rendered the Lowell Plan underfunded; and, had Proujansky acquired that information in 1989 (as she should have under § 1025(a)), she would have known "entirely where she stood" with respect to the Lowell Plan and could have moved earlier to "protect her contractually defined benefits" under that Plan. See also Pagovich v. Moskowitz, 865 F. Supp. 130, 136 (S.D.N.Y.) (§ 1025(a) required administrator to disclose "the most recent plan documents, together with all amendments, trust documents, the IRS determination letter, summary plan description, summary annual report, Form 5500 and all schedules thereto, and personal benefit statements relating to pension and profit sharing plans with respect to which [plaintiff] is a beneficiary."). This is the sort of disclosure that Blau did not make until the Supplemental Accounting on November 22, 1995.
As buyer and new owner of the Lowell School, Proujansky could seek remedies against Blau on contract and related theories in the state courts. Indeed, litigation in the state courts between Proujansky and Blau ensued, as the parties' submissions in the case at bar recount in tedious detail.
It is of no moment that Myron Proujansky, rather than Deanne Proujansky, signed the written request contained in the August 1, 1989 letter. The context makes it clear that Myron was writing on behalf of and as an agent for his niece. ERISA participants may make written requests to administrators for information through agents or representatives. See Algie v. RCA Global Communication, Inc., 891 F. Supp. 839, 869 n. 22 (S.D.N.Y. 1994) ("[T]he fact that the request was made by the former employees' attorney does not exempt it from the requirements of the statute.").
For the foregoing reasons, I conclude that Blau failed to comply with the disclosure requirements of § 1025(a). The remaining issue is whether statutory penalties should be assessed against Blau under § 1132(c)(1).
C. Statutory Penalties
ERISA, 29 U.S.C. § 1132 (c)(1), provides that a plan administrator who fails or refuses to comply with a participant's or beneficiary's written request for disclosable information "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 . . ." Thus the statute commits to the sound discretion of the district court the questions of whether an administrator's conduct warrants the imposition of a penalty at all, and if so, in what amount. In exercising that discretion, "courts have considered such factors as bad faith or intentional conduct on the part of the administrator, the length of the delay, the number of requests made and documents withheld, and the existence of any prejudice to the participant or beneficiary." Pagovich, 865 F. Supp. 130 at 137.
Predictably, Proujansky presses for the maximum penalty of $100 per day for the period from September 1, 1989 through November 21, 1995, a total of 2,272 days, which yields a statutory penalty of $227,200. Using Myron Proujansky's August 1, 1989 letter as the triggering request, that time calculation is correct. See Pagovich, 865 F. Supp. at 138 ("Calculation of the penalty shall run from the first day Moskowitz was in default of his disclosure obligations, February 20, 1993 (the thirty-first day after the written request was made), through and including August 26, 1993, the day before Moskowitz furnished the documents responsive to the request."). Equally predictably, Blau contends that no penalty should be assessed.
Blau makes two threshold arguments to avoid a statutory penalty, neither of any substance. First, Blau contends that "the dismissals of plaintiffs predicate compensatory claims in this action" require dismissal of the claim for statutory penalties. Main Brief at 14. This contention makes inappropriate use of the adjective "predicate." While Proujansky IV dismissed plaintiffs claims for compensatory damages on the ground that no monetary loss had been shown, that disposition has no relation to or effect upon Proujansky's claim for statutory penalties, which accrued and was perfected when Blau failed to furnish the information Proujansky requested in writing. That lack of connection is made crystal clear inProujansky IV. 2000 WL 98382 at *12, where I took pains to observe that "[t]he remaining claim is that contained in Count I, for defendants' failure to make timely accountings as required by ERISA. Plaintiff prevailed on the merits of that claim in Proujansky I." Blau's effort to make Proujansky's discrete claim for statutory penalties occasioned by nondisclosure dependent upon the compensatory claims is contrary to both law and logic. Not surprisingly, Blau cites no case in support of her argument.
The Court's observation further undermines Blau's present argument, rejected in text supra. that the disclosure order in Proujansky I was based solely on provisions in the Lowell School Plan, and did not implicate ERISA in any way.
Second, Blau argues that the question of statutory penalties "has already been resolved by compromise and settlement." Reply Brief at 11. Blau's reference is to Magistrate Judge Grubin's order dated March 27, 1998, which forms the predicate for her argument that Proujansky's claim for statutory penalties "is nothing more than a redundant exhumation of the stale issues that were already settled and put to rest under the supervision of the Magistrate Court [sic] pursuant to this Court's Order of Reference." Id. at 13.
This contention, made for the first time in Blau's reply brief, is not timely. The proper functions of a reply brief are to respond to contentions made by the opposing party in its main brief and to reinforce contentions previously made in one's own main brief. Advancing a substantive argument for the first time in a reply brief is not favored.
In any event, the short answer to this contention is that the settlement memorialized by Judge Grubin's order had nothing to do with Proujansky's claim for statutory penalties, as the plain wording of the order, which I will quote in its entirety, makes clear:
The issue of plaintiff's attorney's fees in connection with their motion seeking an accounting from defendants has been settled. Defendants shall pay to plaintiffs within thirty days $14,500.00 in full satisfaction of the requested amount. This settlement was agreed to by the parties today in a telephone conversation with the court that was recorded.
This settlement may play a part in the Court's consideration of a claim by Proujansky for attorney's fees, if she decides to press one;Proujansky V left that question for later determination. But the settlement recited in Judge Grubin's order has nothing to do with Proujansky's claim for statutory penalties.
To come to the contentions of substance, Blau says that "the discretionary penalty provisions of ERISA should not be imposed because defendants have acted in good faith and no harm befell the Lowell Plan participants." Main Brief at 16. If Blau intends to argue that an administrator's bad faith and prejudice to a participant are prerequisites to any liability under § 1132(c)(1), I reviewed the authorities and rejected that view in Pagovich, 865 F. Supp. at 137, concluding instead that these were factors to be considered with others. The Second Circuit has not squarely addressed the issue, but the principle is clearly established in other circuits; see e.g. Moothart v. Bell, 21 F.3d 1499, 1506 (10th Cir. 1994) ("The circuits are in general accord that neither prejudice nor injury are prerequisites to recovery under the penalty provisions of the statute.") (citing cases). However, a total absence of proof of both bad faith and prejudice may result in the denial of statutory penalties. See (Grohowski v. U.E. Systems, Inc., 917 F. Supp. 258, 262 (S.D.N.Y. 1996) (Parker, J.) ("Under the circumstances in this case, any award to plaintiffs, where the absence of either bad faith or prejudice is so palpable, would be an unjustifiable windfall.").
In the case at bar, the parties debate these factors with characteristic fervor. Proujansky's counsel depict Blau as part Ponzi, part Machiavelli, and part Lady Macbeth. Blau's counsel depict her as a pillar of virtue and rectitude. Proujansky says the delay in disclosure prejudiced her severely; Blau says Proujansky was not harmed in any way.
In Proujansky II, I said that, "[i]t is not necessary for me to conclude that Blau, a distinguished pioneer in the education of learning disabled children, engaged in deliberate self-dealing." That characterization of Blau, while not necessary to the point of decision inProujansky II fell gratefully upon the ears of her counsel; they quote it repeatedly in their subsequent submissions.
Upon consideration of the entire record, I am not persuaded by Proujansky's depiction of Blau as a selfish and cynical plan administrator, scheming throughout to enrich herself wrongfully and at the expense of Lowell Plan participants by an excessive plan-to-plan transfer of assets and a subsequent willful refusal to disclose the accounting details. Blau was advised at the time by Silberstein, who, the record suggests, may not have been the world's premier actuary. InProujansky II II, 1998 WL 157022 at *5, I held that Blau's reliance on her actuary did not excuse her failure to comply with the disclosure provisions of the Lowell Plan; but such reliance can be considered in determining the issue of bad faith in the statutory penalty context, and so can Blau's subsequent reliance upon counsel in the ensuing litigation, who energetically (if unsuccessfully) defended the adequacy of the disclosures Blau did in fact make.
Proujansky's allegations of bad faith on the part of Blau are based upon innuendo, strained inference, and conclusory rhetoric. Moreover, on at least one occasion Blau's conduct was inconsistent with the self-centered and grasping portrait Proujansky paints. Subsequent to the assets transfer, Silberstein advised Blau that he had inadvertently forgotten to account for the benefits of two Lowell Plan retirees, and Blau promptly transferred $70,000 back from the Pre-School Plan to the Lowell Plan to remedy the oversight.
Nonetheless, the inordinate amount of time that Proujansky had to wait for the disclosures to which ERISA entitled her, a recognized factor in the statutory penalty context, is troublesome. In addition, the record demonstrates prejudice to Proujansky. See Pagovich 865 F. Supp. at 138 ("[P]laintiff also suffered harm in the form of distress and frustration with her inability to discover any information about the Plans, and in being compelled to retain counsel and initiate this lawsuit in order to receive information to which she was unquestionably entitled").
In the totality of the circumstances, and in the exercise of my discretion, I fix the amount of statutory penalties at $20 a day. While the imposition of a penalty is necessary to uphold ERISA's purposes in a case where the furnishing of required information was delayed for years, Blau's conduct is not as egregious as that of the administrator inPagovich. where I assessed a statutory penalty of $75 a day.
This penalty rate of $20 a day results in a total penalty of $45,440, payable by Blau to Proujansky. The final judgment to be entered in this case will include that amount.
Counsel are directed to advise the Court by letter, not later than September 21, 2001, whether further litigation is contemplated with respect to attorney's fees.
It is SO ORDERED.