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Media Alerts - Plaintiff E. Perelman, as a participant in the General Refractories Company Pension Plan for Salaried Employees v. Raymo
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July 20, 2015
  Plaintiff E. Perelman, as a participant in the General Refractories Company Pension Plan for Salaried Employees v. Raymo
Headline: Third Circuit Holds No Individual Constitutional Standing in Employee Pension Plan Suit

Area of Law: ERISA

Issues Presented: Under ERISA, can an employee make a successful pension plan claim for restitution and other equitable monetary relief when the employee fails to show any actual injury to himself?

Brief Summary:

Plaintiff Jeffrey Perelman ("Plaintiff") is member of the employee pension benefit plan ("the plan") of General Refractories Company. Plaintiff brought this suit against his father, Raymond Perelman, and his brother, Ronald Perelman, among others. Plaintiff alleged Raymond, as trustee of the plan, covertly directed the plan's purchase of two million dollars in high-risk stocks to Revlon to allow Ronald, the controlling shareholder of Revlon, to raise capital. The Third Circuit found that Plaintiff had no constitutional standing to assert the claim because he could not show any actual injury to himself as opposed to injury to the plan. The Court also reviewed the five Ursic factors in determining that Plaintiff was not entitled to attorneys' fees or costs. The District Court's decision was affirmed.


Extended Summary:

This suit arose under the Employee Retirement Income Security Act of 1974 ("ERISA"), which governs pension plan beneficiaries. Plaintiff/Appellant Jeffrey Perelman is a part of the employee pension benefit plan ("the plan") of General Refractories Company ("GRC"). Plaintiff alleged that his father, Raymond Perelman, breached his fiduciary duties by covertly investing plan assets in the corporate bonds of struggling companies owned by Plaintiff's brother, Ronald Perelman. Plaintiff argued that, among other things, the transactions were not properly reported and put his benefits in jeopardy. The District Court dismissed Plaintiff's claims for equitable monetary relief for lack of constitutional standing and subsequently granted summary judgment in favor of Defendants on all remaining claims. The Third Circuit affirmed the District Court's decision.

Raymond was a trustee of the GRC plan and served as plan administrator between 2003 and 2005. He exercised discretionary control over management of plan assets and qualified as both a plan fiduciary and "party in interest" under ERISA. Raymond's son, Ronald, is the controlling shareholder of Revlon, Inc. Raymond directed the plan's purchase of two million dollars of high-risk Revlon corporate bonds. Plaintiff alleged that Raymond and Ronald structured the transactions to allow Ronald to raise capital for Revlon. Plaintiff alleged that Defendants misreported these investments to the Internal Revenue Service and Department of Labor.

The Second Amended Complaint asserted claims for breach of fiduciary duty of care, prohibited party-in-interest transactions, failure to diversify plan assets, failure to update or maintain proper plan documents, improper delegation of control of plan assets, and failure to prosecute a co-fiduciary's breach of fiduciary duty. Plaintiff sought equitable monetary relief in the form of restitution for plan losses and disgorgement of profits, injunctive relief including the removal Raymond as a trustee, and attorneys' fees and costs. The District Court initially found that Plaintiff lacked constitutional standing on the claims for equitable monetary relief because he failed to demonstrate an actual injury to himself as opposed to the plan. Shortly after the first complaint, Raymond terminated himself as a trustee and appointed Reliance Trust Company to that the position. Thereafter, the District Court granted summary judgment in favor of Defendants on all remaining claims. The District Court subsequently denied Plaintiff's application for attorneys' fees and costs because he had not achieved success on the merits.

On appeal, Plaintiff raised two main claims. First, Plaintiff argued that he had standing to seek monetary equitable relief because he did suffer an increased risk of plan default, and further that no showing of individual harm was necessary. Second, Plaintiff challenged the denial of attorneys' fees, arguing that his lawsuit was a catalyst for the voluntary resignation of Raymond as trustee, and that the District Court misapplied the five Ursic factors.

This Court examined the three elements of constitutional standing: (1) The plaintiff must suffer an injury-in-fact that is concrete and particularized and actual or imminent; (2) there must be a causal connection between the injury and the conduct complained of; and (3) it must be likely that the injury will be redressed by a favorable decision. Plaintiff claimed that the plan suffered a net diminution of approximately 1.3 million dollars in assets and the plan's risk of default increased dramatically. Nonetheless, he received all of the distributions to which he was entitled. Plaintiff's expert testified that the plan's assets were less than its liabilities under at least one analytical approach and therefore created a question of fact. This Court disagreed, as the framework established by Congress has specific accounting methodologies which the plan's funding ratio met. Thus, the actual harm that is required to sustain constitutional standing for equitable relief was not found.

Finally, Plaintiff claimed that he should receive attorneys' fees and costs based on a "catalyst theory" in which he achieved some degree success on the merits. The Court determined that, although Plaintiff did achieve substantive victories, the relative merits of the parties' positions weighed against the award of attorneys' fees. In addition, Defendants' culpability was speculative and the benefit conferred on plan members other than Plaintiff was limited, which also weighed against the award of fees and costs. The District Court's decision was affirmed in all respects.

Find the full opinion at:

http://www2.ca3.uscourts.gov/opinarch/141663p.pdf

Panel: Ambro, Vanaskie, and Shwartz, Circuit Judges

Argument Date: Submitted Under Third Circuit L.A.R. 34.1(a) on April 17, 2015

Date of Issued Opinion: July 13, 2015

Docket Number: Nos. 14-1663 & 14-2742

Decided: Affirmed

Case Alert Author: Jessica Wood

Counsel:

Paul A. Friedman, Esq., Jonathan S. Goldman, Esq., James T. Smith, Esq., Rebecca D. Ward, Esq., Counsel for Appellant

Ethan M. Dennis, Esq., Clifford E. Haines, Esq., Marjorie M. Obod, Esq., Counsel for Appellee Raymond G. Perelman

Michael S. Doluisio, Esq., William T. McEnroe, Esq., Ryan M. Moore, Esq., Andrew J. Levander, Esq., Counsel for Appellee Ronald O. Perelman

Derek J. Cusack, Esq., Counsel for Appellee General Refractories Company

Author of Opinion: Vanaskie, Circuit Judge

Circuit: Third Circuit

Case Alert Supervisor: Professor Mary E. Levy

    Posted By: Susan DeJarnatt @ 07/20/2015 01:49 PM     3rd Circuit  

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