; THE ALLSTATE CORPORATION_ et al._ DEFENDANTS' MOTION TO DISMISS
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THE ALLSTATE CORPORATION_ et al._ DEFENDANTS' MOTION TO DISMISS

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									                           UNITED ST A TES D ISTRI CT CO URT
                     FOR THE EASTERN DISTRICT OF PENNSYLVANIA

                                             -
                                              )
GENE R. ROMERO, et al.,                       )


Plaintiffs.

                v.                                       Civil Action No. 01-CV-6764

THE ALLSTATE CORPORATION,                        )
 et al.,                                         )
                                                 )
Defendants.                                      )


                  DEFENDANTS' MOTION TO DISMISS COMPLAINT
              PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 12(B)(6)
                Defendants   The Allstate   Corporation,     Allstate   Insurance   Company,      Agents ,

Pension Plan and the Administrative Committee in its Capacity as Administrator of the Agents'

Pension Plan, by and through undersigned counsel, hereby move to dismiss the Complaint in its

entirety, pursuant to Federal Rule of Civil Procedure 12(b)(6),            In support   of this   motion,

Defendants rely upon, and incorporate by reference herein, the accompanying Memorandum of

Law

                WHEREFORE, Defendants request that this Court dismiss the Complaint, with

prejudice, in its entirety


Dated: March    II. 2001                         Respectfully submitted,

                                                     /




                                                 Edward F. ~ino           v
                                                 Katherine Menapace
                                                 Attorney I.D. Nos. 04504 and 80395
AKIN, GVMP, STRAVSS,                             One Commerce Square
HAVER & FELD. L.L.P .                            2005 Market Street, Suite 2200
                                                 Philadelphia, PA 19103
                                                 Telephone:     (215) 965-1200
                                                 Facsimile:     (215) 965-1210
                     Donald R. Livingston
                     Robert G. Lian
                     1333 New Hampshire Avenue, N.W.
                     Washington, D.C. 20036


                     Peter A. Bellacosa
                     Citigroup Center
                     153 East 53rdStreet
                     New York, NY 10022
KIRKLAND   & ELLIS
                     Richard C. Godfrey
                     Sallie G. Smylie
                     Donna M. Welch
                     Aon Center
                     East Randolph Drive
                     Chicago, Illinois 60601

                     Attorneys for Defendants




                       2
                        UNITED STATES DISTRICT COURT
                  FOR THE EASTERN DISTRICT OF PENNSYL V ANIA


                                                         )
GENE R. ROMERO, et al.,                                  )
                                                         )
                             Plaintiffs,                 )
                                                         )
                                                         )             Civil Action No. 01-CV-6764
                                                         )
THE ALLSTATE CORPORATION, et at.,                        )
                                                         )
                             Defendants.                 )




                             MEMORANDUM            IN SUPPORT OF
               DEFENDANTS'           MOTION   TO   --~   DISMISS   ~      COMPLAINT
                                        TABLE   OF   CONTENTS

                                                                                                  ~
PRELIMINARY          STATEMENT                                                                               1


BACKGROUND                                                                                               3

       A.     The Scott Case                                                                          ...4


       B.     The     Swain   Case                                                                       7

       c.     The Case At Bar                                                                            9

                          The November 1991 Amendments to the Plan (Counts III and IV)                  9
              2.          The December 1994 Amendments (Count 1)                                        9
              3.          Breach of Fiduciary Duty (Count II)                                          10

ARGUMENT FOR DISMISSAL                                                                                 11



  I.   COUNTS I, III AND IV ARE BARRED               BY THE APPLICABLE       ST A TOTES OF
       LIMIT ATIONS


       A.     Counts I and III are barred under both Pennsylvania's    four-year   and six-year
              statutes of limitations                                                                  12


       B.     Count IV is barred under Pennsylvania's six-year statute oflimitations                   16

 II.   THE ELEVENTH           CIRCUIT'S    DECISION    IN SCOTT BARS COUNTS III AND
       IV                                                                                              17


 III   COUNTS I AND III SHOULD BE DISMISSED BECAUSE PLAINTIFFS                         HA VE
       F AILED TO ALLEGE A REDUCTION IN ACCRUED BENEFITS.                                             20

 TV    COUNT IV SHOULD BE DISMISSED BECAUSE PLAINTIFFS DO NOT
       ALLEGE SUBST ANTIVE HARM FROM THE ALLEGED LACK OF ERISA
       § 204(h) NOTICE.

 v.    PLAINTIFFS'        BREACH OF FIDUCIARY          DUTY CLAIM     SHOULD BE
       DISMISSED.                                                                                     23

       A.     Plaintiffs have failed to allege a misrepresentation under ERISA


       B.     Monetary damages are unavailable for a breach of fiduciary duty under
              ERISA                                                                                   25


CONCLUSION     ...
                            UNITED STATES DISTRICT COURT
                      FOR THE EASTERN DISTRICT OF PENNSYL V ANIA


                                                        )
GENE R. ROMERO. et al..                                 )
                                                        )
                                  Plaintiffs,           )

        v                                                       Civil Action No. 01-CV-6764

THE ALLSTATE CORPORATION, et at..

                                  Defendants.


                            MEMORANDUM IN SUPPORT OF
                     DEFENDANTS' MOTION TO DISMISS COMPLAINT

                                   PRELIMINARY        STATEMENT


                Plaintiffs'   four-count ERISA complaint is subject to dismissal on several well-

establishedgrounds, including statute of limitations and ~_iudicata. Not only is plaintiffs' case

largely too late, it is also legally defective becauseit brings claims that have been previously

brought and rejected by the Eleventh Circuit Court of Appeals.

                 In Counts I, III and IV of the complaint, plaintiffs seekto "repeal" November

1991 and December 1994 amendmentsto the Allstate Agents Pension Plan (the "Plan") basedon

alleged violations of §§ 204(g) and 204(h) of ERISA. Complaint, Prayer for Relief, C(2).

Plaintiffs do not, becausethey cannot, allege that they did not know that their retirement benefits

could be reduced at the time the amendmentswere adopted. To the contrary, the complaint

statesthat plaintiffs had this knowledge at the time the amendmentswere adopted and clearly

suggeststhat the alleged violations ofERISA are inherent in the amendmentsthemselves.

Despite this knowledge, plaintiffs waited until December 20, 2001 to commence this action.

Because plaintiffs   waited   over 10 years to attack the November   1991 amendments   and 7 years to


attack the December 1994 amendments,Counts I, III and IV are untimely and should be
dismissed on the grounds that the claims are barred by the applicable statutes of limitations.          ~

Argument Section I.

                     Plaintiffs' delay in bringing Counts III and IV is even more unjustified because

this is the third time that AIIstate has faced an ERISA lawsuit by purported Plan participants

challenging its adoption of the November 1991 amendmentsto the Plan. Furthermore, Allstate's

wholly successful results in those two previous casesdemonstrate that this latest challenge to the

November 1991 amendments must also fail. In Counts III and IV, plaintiffs allege that a

November 1991 amendment to the Plan, which "purported to phase out and ultimately eliminate

'beefed up' early retirement benefits," is "invalid and unlawful" because(i) it violates the "anti-

cutback" rule ofERISA § 204(g) and (ii) notice of the amendment was not sent fifteen days

before the amendment's effective date as required by ERISA § 204(h). Complaint ~~ 117-118,

120-122. But in a lawsuit brought in 1993 by Allstate Plan participants, the Eleventh Circuit

Court of Appeals held that Allstate's November 1991 amendmentsto the Plan were legally

adopted and lawfully retroactive to January 1, 1989. ~              Scott v. Administrative Comrn. of the

Allstate   Al!ents    Pension   Plan,   13 F.3d 1193 (llth Cir. 1997).

                     In ~,      the Eleventh Circuit denied the claim that plaintiffs assert here --that the

November 1991 amendmentswere never validly adopted --and in the process,the Eleventh

Circuit expressly rejected the identical argument that plaintiffs proffer here --that the November

1991 amendmentscould not be retroactively effective to January 1, 1989 becauseAllstate failed

to comply with the notice requirements ofERISA                § 204(h). The ~    court concluded that

AII state had followed the applicable procedures for amending the Plan and squarely held that no

ERISA § 204(h) notice of the November 1991 amendments was required. 113 F.3d at 1203.

Counts III and IV, in addition to being time-barred, are thus resolved outright by the analysis,

rationale and holding of the Eleventh Circuit in ~.               Indeed, these two counts can, and should,


                                                        -2-
be dismissed based on the doctrine of ~         iudicata. And, in a case brought in 1996 by different

Allstate Plan participants seeking to void the November 1991 amendments,the United States

District Court for the Southern District of Florida did just that --holding in 1999 that the

Eleventh Circuit's decision in ~          precluded any challenge to the legal effect of the November

1991 amendments      under the doctrine    of re~ judicata.   ~   Swain v. Allstate   Ins. Co., No.96-998


(S.D. Fla. filed Jan. 25, 1999). ~        Argument Section II.

                Additionally,    Counts I, III and IV should be dismissed for reasons specific to each

claim. Counts I and III fail to state a claim because plaintiffs have not alleged a reduction in

accrued benefits and ERISA § 204(g) is therefore inapplicable.          ~    Argument Section III.

Count IV should be dismissed becauseplaintiffs do not allege substantive haml from the alleged

lack of ERISA § 204(h) notice. Se~ Argument Section IV.

                Finally, plaintiffs'   breach of fiduciary duty claim in Count II should be dismissed

for two separate reasons. ~Argument           Section V. firn,    the allegations of the complaint make

clear that there was no misrepresentation. The two alleged "misrepresentations" on which

plaintiffs basetheir breach of fiduciary duty claim, are, in fact, statementsthat are true and

entirely consistent with the Plan and its terms. Plaintiffs simply do not like, and are therefore

challenging here, those terms of the Plan. But that does not, and cannot, transform accurate

statementsabout the Plan and its tenns into misrepresentations. Second, plaintiffs seek monetary

damages,which are unavailable for a breach of an ERISA fiduciary duty.

               Accordingly,     as set forth in detail below, defendants respectfully request that the

complaint be dismissed in its entirety.

                                             BACKGROUND


               For a third time, Allstate faces an ERISA lawsuit challenging its November 1991

adoption of amendmentsto the Plan in responseto the Tax Reform Act of 1986 ("TRA '86").


                                                     -3-
 The ~         and ~         cases discussed briefly above provide, therefore, an important factual and

 legal framework for this case. Moreover, the ~                 and ~      decisions demonstrate that, for the

third time, the challenge to the November 1991 amendmentsshould be dismissed.

         A.         The    Scott   Case


                    In 1986, Congress passed TRA '86. A principal purpose ofTRA               '86 was to

eliminate discrimination in favor of highly compensatedemployees. TRA ' 86 required that a

non-discriminatory        benefit formula, as well as certain other plan changes, be in place by

January 1,1989. Congressdirected the IRS to issue regulations that would guide employers in

complying with the new law. ~,                  113 F.3d at 1195.

                    In response to TRA ' 86, the Pension Committee of Allstate ' s Board of Directors


concluded that the Plan could and should be amended. The Eleventh Circuit's decision in ~

details the procedural and substantive steps taken by Allstate to amend the Plan in responseto

TRA ' 86, many of which were complicated considerably by the IRS being late with the required


regulations.    ~      at 1195-1198, 1201 n.23. Once the IRS did issue its regulations, it was clear that

TRA ' 86 pennitted redesign of benefit programs and reduction in benefits so long as the end


result eliminated discrimination in favor of highly compensatedemployees. ~                  Rev. Froc. 89-

65; Notice 88-131, CCH Pension Plan Guide, 17,101X, at 20-385-67. Ultimately, the Pension

Committee adopted a number of Plan amendments on November 15,1991, some of which were

made retroactively effective to January 1,1989 in accordancewith TRA '86. ~,                      13 F.3d at

 198.1




1 In Counts III and IV here, plaintiffs          seek to "repeal" one of these retroactive amendments --
what they term the elimination            of "beefed-up early retirement benefits."   Complaint ~~ 117-118.
120-122.


                                                          -4-
                      In 1993, three Allstate Plan participants, including a plaintiff named Scott,

brought a declaratory judgment action alleging, among other things, that two of the November

1991 amendments were invalid becausethey violated ERISA §§ 204(g) and 204(h). ~,                       113

F .3d at 1193.        The amendments   at issue in ~     were those that (i) changed the benefit   fonnula


from 2.5% of compensation with a Social Security offset to 2.0% of compensation with no

Social Security offset, and (ii) changed the normal retirement age under the Plan from age 63 to

age 65.   14:.   at    198. The ,S£Q!!plaintiffs alleged that these amendments were not adopted in

accordancewith the Plan and ERISA and could not lawfully be applied retroactively because

"defendants failed to follow interim Internal Revenue Service (IRS) regulations."           14. at 1195. In

particular, the ~          plaintiffs alleged that Allstate had failed to comply with ERISA § 204(h) and

that, consequently, the November 1991 amendments were void. ~                at 1201.

                      Plaintiff Scott also challenged AIistate's policy of not paying the "beefed-up"

early retirement benefit to those agents who had opted for Neighborhood Exclusive Agency

("NEA ") status          that is, those agents who had changed their relationship with Allstate from that

of employee to that of independent contractor.2 In particular, Scott alleged that Allstate violated

ERISA in denying him the "beef up" benefit on the grounds that (i) he was not "retiring" within

the meaning of the Plan, and (ii) he did not retire in accordancewith AIistate's Voluntary Early

Retirement policy .Scott        v. Administrative   Comm. of the Allstate A1!ents Pension Plan, No. 93-

1419 CIV-J-IO, 1995 WL 661096, *13 (M.D. Fla. Sept. 15, 1995).

                      Following a four-day bench trial in the United StatesDistrict Court for the Middle

District of Florida in October and November 1994, the district court "concluder d] in fact and in

law that the Plaintiff Scott [was] not entitled to any relief or recovery on his claim that he should



 NEAs are now referred to as "exclusive agents" by Allstate.           Complaint ~ 63


                                                       -5-
be entitled to the 'beef up' benefit available upon early retirement." ~ at *20. The district court

concluded that Allstate's Administrative Committee properly interpreted the Plan's requirement

that the agent "retire" for entitlement to the "beef up" and that Scott had not "retired" when he

opted to become an independent contractor.        ~    The district court further concluded that Allstate

had taken all the proper steps in interpreting the Plan:

                (i) the Administrative Committee spent time and effort in
                researching the issue, (ii) the Administrative Committee obtained
                legal advice, (iii) it was made clear to agents considering the NEA
                program that they would not receive the beef up, (iv) the Plan was
                promptly amended following the enactment of the UCAA
                [Unemployment Compensation Amendments Act of 1992] to
                permit the payment of normal retirement benefits, and (v) to the
                extent that the denial of the beef up benefit could be viewed as a
                disincentive for agents to convert to NEA status, the
                Administrative Committee interpretation was inconsistent with the
                Company's apparent business objectives.

14:.

                Concerning the November 1991 amendments,the district court did grant

declaratory relief in favor of the S.£Qll plaintiffs "entitl(ing   the Plaintiffs]   to a determination or

calculation of their benefits under the Plan (past, present and future) on the basis that the

amendments    to the Plan adopted on November         15. 1991 were not retroactive      to January   1, 1989,


but becameeffective on Apri115. 1992." ~,              1995 WL 661096, *21. In the district court's

view, "the procedures prescribed in IRS Revenue Procedure 89-65, 1989-2 C.B. 786, were not

followed." ~,        113 F .3d at 1195. The district court did not void the amendments,however,

but rather found that "the November 15, 1991 amendmentsdid not become effective until fifteen

days after the giving of § 204(h) notice         of the amendments; the court found the effective date

to be April 15. 1992." ~      at 1198. Based on these conclusions, "the district court granted

plaintiffs declaratory relief, and held that the plaintiffs were entitled to have their benefits under

the Plan calculated under the pre-amendment fonnula up until Apri115,                1992." lQ..


                                                      -h-
                 Allstate appealed to the Eleventh Circuit Court of Appeals. The .s..£Q!!
                                                                                       plaintiffs

filed a cross-appeal,and continued to argue on appeal that the November 1991 amendmentswere

never validly adopted and were, therefore, void. ~,                 13 F.3d at 1201 & n.24.   Plaintiff   Scott

did not appeal the district court's decision denying him the "beef up" benefit. In its June 2, 1997

opinion, the Eleventh Circuit reversed the district court and held, among other things, that

AIIstate's November 1991 amendmentsto the Plan were legally adopted and lawfully retroactive

to January 1, 1989. ~,         113 F .3d at 1203. Central to the Eleventh Circuit's holding was its

conclusion that the applicable procedures for amending the Plan ~                 followed by Allstate and

                                                                                3
that llQ ERISA § 204(h) notice of the November 1991 amendments was required. lQ..


        B.       The   Swain   Case


                 After the ~      appeal was fully briefed but ~          ~,      two other AIlstate Plan

participants, Swain and O'Connor, filed an ERISA lawsuit in the United StatesDistrict Court for

the Southern District of Florida alleging, among other things, that the November 1991

amendments were void @ ill!!ill       because no ERISA § 204(h) notice was provided.           The ~

plaintiffs also sought the restoration of the pre-November 1991 amendment benefit levels.

                 In addition, the ~          plaintiffs   attempted to give certain of their allegations a

non-~        twist. The ~       plaintiffs    claimed that an ERISA § 204(h) notice sent to Plan

participants on December 15, 1994 was misleading. This ERISA § 204(h) notice pertained to

Allstate's "re-adoption" in December 1994 of the November 1991 amendments(the "December

1994 Re-Arnendment"). The December 1994 Re-Arnendment was prompted by the fact that the

remedial amendment period for TRA '86 compliance ended on December 31,1994 and, as that


3 Despite this clear holding in ~,           plaintiffs here mislead this Court with allegations such as,
"the November 1991 amendments([ ] were procedurally defective becauseAllstate failed to
comply with the requirements of section 204(h) ofERISA, 29 U.S.C. § 1054(h))." Complaint
'57.


                                                          -7-
date approached, it was clear that the ~           trial would likely be undecided, and that any appeal

certainly would not be concluded. To ensure that the Plan would comply with TRA '86 and thus

not be at risk ofIRS disqualification, Allstate (i) "re-adopted" the amendmentsthat it believed it

had adopted earlier and as to which fonnal Plan language was adopted on November 15, 1991

and (ii) sent out an ERISA § 204(h) notice to that effect. Of course, in light of the Eleventh

Circuit's subsequentand complete vindication of Allstate's earlier'actions in amending the Plan,

the December 1994 Re-Amendment effected no change whatsoever in the Plan; in retrospect, it

was unnecessaryand duplicative. 4

                Once the ~        appeal was decided, the United States District Court for the

Southern District of Florida held that the Eleventh Circuit's decision in ~                     precluded any

challenge to the legal effect of the November 1991 amendmentsto the Plan under the doctrine of




challenging the retroactive amendment of the Plan or seeking restoration of pre-[November

1991] amendment benefit levels are precluded by. ..~                  ...   ",).5   The   ~           COurt   did,


however, permit the ~          plaintiffs to try to state a claim based on the December 1994 Re-

Amendment. ~,           1/25/99 Order at 14-15. Although given three opportunities by the district

court, the ~     plaintiffs'   breach of fiduciary     duty claim under ERISA             and civil     RICO claim


were thereafter dismissed on multiple grounds for failure to state a claim. That dismissal was

affinned by the Eleventh Circuit, and a petition for writ of certiorari was denied by the Supreme

Court of the United States.6


4 Throughout   the complaint    here ~,     ~,     ~~ 2, 57, 118), plaintiffs       erroneously       imply     that the

December   1994 Re-Arnendment        effected    a change to the Plan.

5 A copy of the two ~          orders is attached hereto at Tabs 1 and 2 for the Court's                  convenience.

6 A copy of these decisions is attached hereto at Tabs 3,4, and 5 for the Court's convenience.



                                                       -8.
        c.          The Ca~e At Rar

                    The following      facts are based on the allegations in plaintiffs'                  complaint.

                    I.       The   November            1991   Amendments       to the Plan         (Counts     III   and    IV)


                    More than 10 years after Allstate' s adoption of the November 1991 amendments

to the Plan and almost 13 years after the date on which the Eleventh Circuit held the amendments

to be lawfully     effective (January 1, 1989), 32 more purported Allstate Plan participants, on

behalf of themselves and a purported class, seek to "repeal" one of the November 1991

amendmentsto the Plan. Based on the same alleged violations ofERISA §§ 204(g) and 204(h)

that were rejected in ~,           plaintiffs seek to repeal an amendment that "purported to amend the

Pension Plan in November 1991 (retroactive to January 1,1989) by adding a 'sunset' provision

reducing 'beefed-up' benefits for those employee agentswho obtained eligibility on or after

January 1, 1991, and eliminating             it entirely for employee agents who become eligible for early

retirement   after December        31, 1999."      Complaint         ~ 55. ~    ~       ~   ~~ 116-122.

                    In Count III, plaintiffs thus allege that " Allstate violated.                  ..ERISA,
                                                                                                                        Section

204(g)(2)          [i]n phasing out the 'beef up"'byamendmentinNovember                               1991. ~~4.             ~~

~   ~ 118. In Count IV, plaintiffs           further    allege that Allstate    violated         ERISA     § 204(h) "[i]n


failing to provide written notice to participants and beneficiaries of the amendment                                       at least

fifteen days before the .          effective    date.     .." of the November         1991 amendments.               Id, ~ 122.


                    2.       The   December        1994       Amendments       (Count       1)

                    In Count I, plaintiffs      allege that " Allstate     violated
                                                                                                 ERISA         Section

204(g)(2)        .[i]n       altering eligibility requirements for obtaining early retirement

benefits.     ," ~       ~ 4. ~    ~     ~     ~ 99 (the "December         1994 amendments               violated    the 'anti-


cutback' rule embodied in section 204(g)(2) of ERISA




                                                                 n
                In their complaint, however, plaintiffs conjoin two events from December of 1994

that should be separated. Bill,     as discussed above in connection with the ~                  case, Allstate

re-adopted the November 1991 amendmentsto the Plan in December of 1994 not becausethey

                                                                              ,
"were procedurallydefective,"asplaintiffs falsely chargein their complaint(iQ.. 57), but

                 case
becausethe .s..£Q1! was unresolved and the date for compliance with TRA '86 was December

31, 1994. Becausethe Eleventh Circuit in ~                upheld the November 1991 amendmentsand

held them lawfully retroactive to January 1, 1989, AIistate complied with TRA '86. The

December 1994 Re-Amendment, therefore, was a classic "belt and suspenders"exercise --it

effected no change to the Plan.

               Second, a separate amendment was adopted in December 1994 umelated to TRA

'86, which plaintiffs claim purported to "alter the eligibility requirements for obtaining early

retirement benefits by only counting 'service' that converted agents performed in their capacity

as Allstate 'employees' toward the fulfillment of those requirements and excluding any 'service'

they might have perfonned in their capacity as 'independent contractors' of Allstate."                   !.4. ~ 99.

Plaintiffs state that Allstate has "failed to treat agents who have converted to the R300l contract

as being 'in the service' of the company under the Pension Plan at all times since the December

1994 amendments were adopted. ... " ~            ~ 62. Plaintiffs    further   admit that " Allstate    instructed


its employee agentsthat such service would not count under the Pension Plan                     .since it

amended the Pension Plan in December 1994." ~                ~ 67.

               3.      Breach     of Fiduciarv     Dutv     (Count   m


               In Count II, plaintiffs allege that defendants "violated their respective fiduciary

obligations under Section 404(a) ofERISA,          29 U.S.C. § 1104(a) ...[i]n         making material

misrepresentationsrelating to the availability of benefits under the Pension Plan.                     ,"~'114
Plaintiffs base this claim on two alleged "misrepresentations" relating to fonner Allstate


                                                     -10-
employees' eligibility         for benefits after opting to become independent contractors. ~          ~ 108

Plaintiffs allege that Allstate:

                    representedto those retired agent plaintiffs that they would be
                    'exclusive agent independent contractors' under the arrangement
                    created by R3001 contract and, hence, would not be able to
                    accumulate additional 'service' for purposes of: (a) determining
                    eligibility for early retirement benefits and 'beefed-up' benefits
                    under the Pension Plan; and (b) eligibility to receive any pension
                    benefits to which they were not already entitled as of the date their
                    employment contract was terminated.

l.Q.

                    In the very next paragraph of the complaint, however, plaintiffs concedethat the

Plan and its tenns provided exactly that under the December 1994 amendment to the Plan. ~

~ 109. Plaintiffs     simply    believe    that the December     1994 amendment    is "unlawful   and invalid"


(~), but plaintiffs do not, becausethey cannot, allege how it could possibly be a

misrepresentation for Allstate to have communicated what the terms of the Plan actually are.

                                          ARGUMENT       FOR     DISMISSAL


                    A complaint should be dismissed pursuant to Rule 12(b)(6) when, accepting as

true all facts alleged in the complaint, the plaintiff still has failed to state a claim upon which

relief can be granted.     ~,      ~,     Kost v. Kozakiewicz,     I F.3d 176, 183 (3d Cir. 1993).     While     a


court must accept as true all well-pled factual allegations in the complaint and draw all

reasonable inferences in favor of plaintiff          in deciding a Rule 12(b)(6) motion, the plaintiff is

nonetheless"required to' set forth sufficient information to outline the elements of his claim or

pemlit inferences to be drawn that these elements exist."'             lQ.. (quoting SA Charles A. Wright and

Arthur R. Miller, Federal Practice and Procedure, § 1357, at 340 (2d ed. 1990)). Plaintiffs

cannot meet this burden by merely stating legal conclusions.                 ~   Burks v. City of Philadelohia,

904 F. Supp. 421,425 (E.D. Pa. 1995). Furthennore, in examining the sufficiency ofwell-pled



                                                         _11-
facts, the court "will not strain to find inferences favorable to the plaintiffs which are not

apparent on the face of this        complaint." Coates v. Illinois State Bd. ofEduc., 559 F.2d 445,

447 (7th Cir. 1977); ~    ~    ~,       904 F. Supp. at 425

                Applying these standards,plaintiffs' complaint should be dismissed under Rule

12(b)(6) for failure to state a claim upon which relief can be granted.



I.      COUNTS I, III AND IV ARE BARRED BY THE APPLICABLE                             STATUTES OF
        LIMIT A TIONS.

                Counts I, III and IV ofplaintiffs'      complaint are brought under 29 U.S.C. § 1132,

ERISA's civil enforcement provision governing non-fiduciary claims. BecauseERISA does not

provide a specific limitations period for its civil enforcement provisions (other than for breach of

fiduciary duty under ERISA § 404,29 U.S.C. § 1104), courts "apply the statute of limitations for

the state claim most analogous to the ERISA claim pursued."          Gluck v. Unisvs Corn., 960 F .2d

1168,   179 (3d Cir. 1992).

                Here, either Pennsylvania's four-year limitation or six-year limitation governs

Counts I, III and IV. Plaintiffs filed their complaint after both limitations periods had expired.

Accordingly,   these counts should be dismissed with prejudice. $ee., ~,       Williams v. District

1199C.,1999 WL 391572 (E.D. Pa. June 15, 1999) (dismissing with prejudice claim barred by

statute of limitations); Kate~ v- neJvi"", 1992 WL 396770 (E.D. Pa. Dec. 24,1992) (same).

        A       Counts I and III are barred           under both Pennsylvania's    four-year   and six-
                year statutes of limitations



                In Q1y£k, the Third Circuit established a three-part rule for determining which

Pennsylvania statute of limitations applies to a given ERISA claim. In general, the court divided

ERISA claims into three categories, each with a corresponding state cause of action and,




                                                     -12-
therefore, a corresponding statute of limitation.                           The first category consists of ERISA claims for

delinquent employer contributions or for past due payments. These claims, according to the

Ql.y£k court, are most analogous                     to claims        under Pennsylvania's        Wage and Payment         Collection


Law and are governed by the Collection Law's three-year statute of limitations. ~                                          .QlY£k,960

F.2d at 1181

                           The second or third categories of ERISA claims are potentially applicable here.

ERISA claims to recover benefits that were bargained for but have not yet become due constitute

the second category .The Ql.y£k court held that these claims resemble a "contract" action.

Therefore, Pennsylvania's four-year limitation for breach of contract --42 Pa.Stat.Ann § 5525 --

provides the appropriate measure ''as to how long the party ought to have to bring suit." 14. at

 1181. ERISA claims that do not fall into the first category and do not resemble contract actions

are governed by Pennsylvania's general six-year statute of limitations, 42 Pa.Stat.Ann. § 5527.

           the
In QlY.<;lo;;, court gave two general examples of such claims: an action to reinstate an

  'improperly removed non-bargained-for                             benefit" and an action "to avoid a prohibited

transaction.         " ~     at 1181.


                           While Pennsylvania state law determines the limitations periods for plaintiffs'

                                                                               "                                   Paine    Webber
claims, "federal, not state, law governs as to when the cause of action accrues.

Inc. v. Faragalli,           61 F.3d 1063,1066-67               (3d Cir. 1995).     In Counts I and III here, plaintiffs


challenge        the adoption       of a November            1991 amendment         and a December          1994 amendment            to the


Plan. These amendments,according to plaintiffs' complaint, had the effect of reducing

retirement benefits for purported classesof Plan participants. Federal law is clear that the cause

of action accrues either on the date of the Plan amendment at issue, ~                                    lnt'l Union of Elec..

Elec..   Salaried.         Mach.   and   Furniture       Workers.        AFL-CIO    v.   Murata    Erie   Noh                   980




F.2d 889, 900 (3d Cir. 1992), or "at the time the plan beneficiary becomesaware that benefits


                                                                         -13-
will be denied under the plan." Frazier v. Hairston,   2001 WL 964152,   at *2 (E.D. Pa. Aug. 23,


2001); ~~        Bennett v. FederatedMut. Ins. Co., 141 F.3d 837,839 (8th Cir. 1998) (holding

that an ERISA action accrues "before a claim for benefits is filed. when there has been a clear

repudiation [ofbenefits] which is clear and made known to the beneficiary") (internal quotations

and citation omitted).

                 The caseof Union Pacific Railroad Comoanv v. Beckham is illustrative of this

rule under a set of facts quite similar to those here. In Beckham, a subsidiary of Union Pacific

Railroad Company ("UP") acquired the Missouri-Kansas-Texas Railroad Company ("MKT").

Prior to the acquisition, which took place on August 12, 1988, UP allowed MKT employees to

accept a voluntary severancepackage or become UP employees. UP explained the details of its

pension plan to MKT employees in various "fact sheets." The MKT employees were informed

that those who chose to become UP employees would, as of August 12, 1988, stop accumulating

"Credited Service" under the MKT pension plan and aGcumulate"Credited Service" only under

the UP plan. UP also explained that the accumulated "Credited Service" of former MKT

employees under the MKT pension plan would not be counted toward "Credited Service" under

the UP plan. ~     Beckham, 138 F.3d, 325,327-28 (8th Cir. 1998).

                 In 1992, UP amended its pension plan to offer early retirement to employees with

at least four years of "Credited Service." UP did not, consistent with what it had explained to
                                        ,

fonner MKT employees, count time accumulated under the MKT plan toward this "Credited

Service." In 1994, UP filed a class action for declaratory judgment against fonner MKT

employees who were now claimants under the UP pension plan. The claimants, in turn,

counterclaimed with various causes of action based on UP' s decisions with respect to its

calculations of "Credited Service" under the UP and MKT plans. ~         ~ at 328.




                                                -14-
               The Eighth Circuit held that all of the claimants' ERISA causesof action were

time barred under Nebraska's five-year statute of limitations. In reaching this decision, the court

held that the ERlSA claims accrued on August 12, 1988. As of that date, the court concluded,

UP had "clearly and unequivocally informed" MKT employees of how UP would treat "Credited

Service" under theMKT     plan. ~     iQ.,. 331 Accordingly,
                                          at                         the claimants last day to file suit

was on August 12, 1993, well before the 1994 filing of their counterclaims.

               Like UP in Beckham, plaintiffs in Count I concede that Allstate has not "treat[ ed]

agentswho have converted to the R300l contract as being 'in the service' of the company under

the Pension Plan at all times since the December 1994 amendmentswere adopted

Complaint ~ 62. Moreover, plaintiffs admit in their complaint that before December 1994, just

as UP informed MKT employees about how "Credited Service" would be determined, so too did

Allstate: "Allstate instructed its employee agents that [service under the R3001 contract] would

not count ras "Credited Service"l under the Pension Plan. ..,        ,"    14. ~ 67.


               December 1994 is, therefore, the latest time period in which plaintiffs' ERISA

cause of action in Count I could have accrued. Count I is thus time-barred regardless of whether

Pennsylvania's four-year or six-year statute of limitations is applied.

               Likewise, plaintiffs do not allege that Allstate failed to infonn Plan beneficiaries

of its decision to phaseout the early retirement "beef up" benefits at issue in Count III. To the

contrary, plaintiffs' complaint indicates that beneficiaries knew of the change in early retirement

benefits as far back as November     1991 when A11state "purported"            to adopt Plan amendments


containing this provision, and again in December 1994, when Allstate "readopted" the November

1991 amendments.     Complaint     ~ 118. The Eleventh   Circuit's        .s..£Q!!decision   acknowledged   as


much when the court held that the November 1991 Plan amendments,which included the sunset

provision for the "beef up" benefits, were validly adopted on November 15, 1991 ~~,


                                                  -15-
 113 F.3d at 1203.7 Accordingly, even using the later December 1994 "re-adoption" date instead

 of the November 1991 date of the amendment, Count III is time-barred whether Pennsylvania's

 four-year or six-year statute of limitations is applied.

        B.      Count   IV   is barred   under   Pennsvlvania's   six-vear   statute   of limitation


                Count IV is premised on an alleged violation ofERISA           's notice provision

 concerning the Plan amendments' sunset provision for early retirement "beef up" benefits. There

 is no counterpart in Pennsylvania state law to this claim. Under the QlY£k analysis, then,

plaintiffs must have brought their claim within six years of its accrual date. Again, viewing

plaintiffs' complaint in the most liberal light, the latest date on which Plan beneficiaries could

have become aware of the phasing out of the "beef-up" early retirement benefits was November

 15, 1991, the date the Plan amendmentswere adopted. Plaintiffs missed that deadline --

November 15, 1997 --by more than four years. Count IV, too, must be dismissed.8




7 Moreover, although the Eleventh Circuit ultimately held that no ERISA § 204(h) notice of the
November 1991 amendmentswas required, the district court in S£Q!! found as a matter of fact
and law that Allstate provided ERISA § 204(h) notice of the November 1991 amendmentsin
April of 1992. ~,      1995 WL 661096, *17.
8 This analysis, of course, assumesthat a notice under ERISA § 204(h), 29 U.S.C. § 1054(h),
was even necessary. The Eleventh Circuit held that 204(h) notice of the November 1991
amendmentswas not necessaryas a matter of law:

       Because we conclude that the defendants gave satisfactory notice in compliance
       with the manner in which Rev. Proc. 89-65 incorporates the § 204(h) notice, and
       because we conclude that a second § 204(h) notice was not required for the
       November 15, 1991, amendments, we hold that the Plan amendments in this case
       are retroactive to January 1, 1989.

~,    113 F.3dat 1203


                                                    -16-
II.           THE ELEVENTH             CIRCUIT'S       DECISION         IN SCOTT BARS COUNTS III AND
              TV-

                         Not only does the fact that the ~         and ~           cases were brought support

dismissal here based on the statute of limitations, the decisions in those casesdemonstratethat

Counts III and IV are substantively without merit and should be dismissed based on the doctrine

of~          judicata.


                         As set forth above, the ~      case involved Allstate's efforts to comply with TRA

'86 and its November 1991 adoption of amendmentsto the Plan in response to TRA '86. Two of

the November 1991 amendments were challenged in ~                          and a third is challenged here by

plaintiffs       in Counts III and IV. In both ~         and in this case, plaintiffs claimed violations of

ERISA §§ 204(g) and 204(h). The Eleventh Circuit's holding that (i) the November 1991

amendments were legally adopted and lawfully                 retroactive to January 1, 1989 and (ii) no ERISA

§ 204(h) notice was required           to effectuate   the amendments       disposes of Counts III and IV.           ~


~,             13 F.3d at 1203

                         The ~     casereached the Eleventh Circuit after the district held that. because

Allstate failed to follow interim IRS regulations in order to comply with TRA '86 in

retroactively amending the Plan, the November 1991 amendmentswere ineffective and could not

retroactively reduce benefits accrued after January 1, 1989. After an exhaustive analysis ofTRA

'86, the IRS regulations, Allstate's efforts to comply with TRA '86 and the regulations and

ERISA § 204(h), the Eleventh Circuit held that the November 1991 amendments were legally

adopted and lawfully retroactive to January              , 1989.    In addition,     the Eleventh   Circuit   held   that


no ERISA § 204(h) notice of the November 1991 amendmentswas required. ~                                  ~,      113

F .3d   at    1202.      This exhaustive analysis and ultimate holding bars plaintiffs' identical claims

here         that the November 1991 amendment eliminating              the "beef up" is unlawful and invalid



                                                          -17-
 because of alleged violations ofERISA         §§ 204(g) and 204(h). Indeed, as the ~            court held,

 the ~    decision can, and should, be given ~          judicata effect under the doctrine of virtual

 representation.

                The elements of ~iudicata          are (i) a final judgment on the merits in an earlier

suit, (ii) sufficient identicality between the causesof action assertedin the earlier and later suits.

and (iii) sufficient identicality between the parties or their privies in the two suits. Allen v.

McCu!IY, 449 U.S. 90,94 (1980). The test is met here.

                fu!,   the ~       caseunquestionably resulted in a final judgment on the merits.

Second, the sufficient identicality    requirement is met in light of the ~      judicata doctrine of

virtual representation.   ~    Robertson v. Bartels, 148 F. Supp.2d 443,449 (D.N.J. 2001); Tvus v.

Schoemehl, 93 F.3d 449,451,456-57           (8th Cir. 1996), ~ert:. ~,      117 S. Ct. 1427 (1997);

NAACP v. Hunt, 891 F.2d 1555,1561 (11th Cir. 1995). Under that doctrine, "a person may be




with his interests as to be his virtual representative. " Aeroiect-General       Corn. v. Askew,     511 F.2d




defendant Oade County that closely aligned defendant in prior casehad disincentive to raise

defense Dade County sought to raise), ~           denied, 423 U.S. 908 (1975). Accord ~,             93 F.3d

at 456-57 (concluding that preclusion based on virtual representation was appropriate where

plaintiffs in voting dilution case had a "close relationship" with the plaintiffs in a prior suit);

NAACP, 891 F .2d at 1561 (finding NAACP action barred because plaintiff               in suit filed thirteen




to the NAACP's interests in the original suit that he was their virtual representative").

               Here, plaintiffs'   interests are virtually   identical to those of the ~     plaintiffs.

Both sets of plaintiffs are purported Plan participants claiming the samepurported injuries                a

                                                     -18-
reduction in benefits resulting from Allstate's November 1991 amendmentsto the Plan --and

both argue for the same result --a repeal of a November 1991 amendment to increase their

benefits with a corresponding cost to Allstate.9

                The remaining prong is also satisfied becausethe doctrine of ~ _iudicataapplies

"not only as to every matter which was offered and received to sustain or defeat the claim or
                                                                                                   "
demand, but as to any other admissible matter which might have been offered for that purpose.

Nevada v. United States, 463 U.S. 110, 129-30 (1983). Consistent with the broad reach of the

doctrine of ~   iudica~ it "applies not only to the precise legal theory presentedin the prior case,




9 The ~     court identified a related factor that also applies here by analogy. ~      noted a
distinction between "private law" and "public law" issues and found the doctrine of virtual
representation particularly appropriate in the public law context. The ~   court stated that
preclusion in such cases was necessary to discourage "fence-sitting":

                There is another important consideration: in the public law context, if the
                plaintiff wins, by definition everyone benefits. Holding preclusion
                inapplicable in this context would encourage fence-sitting, because
                nonparties would benefit if the plaintiffs were successful but would not be
                penalized if the plaintiffs lost.

93 F .3d at 456.
  ERISA, of course, was designed in order to further the "public interest in encouraging the
fonnation of employee benefit plans." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,54 (1987).
In addition, Congress put preemption provisions in place to "establish pension plan regulation as
exclusively a federal concern." Alessi v. Ravbestos-Manhattan.Inc., 451 U.S. 504,523 (1981).
~ ~ 29 U.S.C. § 1144. Although the validity of Allstate's November 1991 amendments
might not be a matter of "public law," the substantive concern that drives the private law-public
law distinction is present in this case. BecauseERISA (i) requires that a plan be administered
unifonnly in accordancewith the documents and instruments governing the plan, and (ii)
provides only equitable relief under section 502(a)(3) to plaintiffs, such as those here, it is
indisputable that had the ~      plaintiffs won, plaintiffs here would have benefitted. The
equitable considerations underlying ERISA and the doctrine of virtual representation thus
compel the result, as in ~,     that plaintiffs here (and especially those plaintiffs here resident in
the Eleventh Circuit) should be bound by the ~         plaintiffs' loss in the Eleventh Circuit. ~,
93 F.3d at 456.



                                                   -19-
but to all legal theories and claims arising out of the same nucleus of operative fact." NAACP ,

891 F.2d at 1561

                          In ~,           the district court applied the doctrine of ~        judicata and held that any

claim by the plaintiffs there that certain Plan amendmentscould not be enactedretroactively was

precluded by the Eleventh Circuit's decision in ~.                         ~       Tab 1 at 22. Just as in ~,       the

claims raised by plaintiffs in Counts III and IV arise from the same nucleus of operative facts as

those at issue in ~                 and are premised on a legal theory that not only "could have been" but

"was"    put forth vigorously              by the ~      plaintiffs   in support    of their claims.   Counts III and IV


should, therefore, be dismissed.

III.     COUNTS I AND III SHOULD BE DISMISSED BECAUSE PLAINTIFFS                                                       HA YE
         FAILED TO ALLEGE A REDUCTION IN ACCRUED BENEFITS.

                          Section 204(g) ofERISA          prohibits an employer from decreasing a participant's

"accrued benefit" by amending a pension plan. ~                          29 U.S.C. § 1054(g). Here, plaintiffs do not

allege a reduction in accrued benefits, and Counts I and III must, therefore, be dismissed. See

8erger   v.   Edgewater           Steel   Co.,   91
                                                      F.2d911,918(3dCir.1990).

                          Section 204(g) provides, in relevant part, that "[t]he accrued benefit of a

participant under a plan may not be decreased by an amendment of the plan. "                            29U.S.C.   §



1054(g). In Berger, the Third Circuit relied on the legislative history of section 204(g) in

concluding that employees did not have a protected interest in an early retirement benefit. In

~,        the early retirement benefit was available if, among other things, the employer decided

that the benefit was in the Company's best interest. Because a participant has to demonstrate

that he or she has met the pre-amendment requirements for the benefit and becausethat decision

had not been made as to the employer plaintiffs when Edgewater amendedthe plan to eliminate




                                                                  -20-
 the benefit, the Third Circuit held that they had no protected interest in the early retirement

 benefit and, therefore, ERISA § 204(g) was not violated.       ~   at 918.




 have an accrued interest in the "beef up" benefit only to the extent that they meet the




plaintiff Scott's section 204(g) claim, the district court found that Allstate's Administrative

Committee properly interpreted the Plan's requirement that the agent "retire" for entitlement to

the "beef up" and that plaintiff Scott had not "retired" when he opted to become an independent

contractor).    Plaintiffs have failed to make such an allegation, and Counts I and III should,

therefore. be dismissed.

IV.       COUNT IV SHOULD BE DISMISSED BECAUSE PLAINTIFFS                                     DO NOT
          ALLEGE SUBSTANTIVE HARM FROM THE ALLEGED LACK                                      OF ERISA
          § 204(h) NOTICE.

                  As set forth above, the Eleventh Circuit held in ~          that no ERISA § 204(h)

notice of the November 1991 amendments was required. If this Court were to conclude, contrary

to the clear holding of~,       that ERISA § 204(h) of the November 1991 amendmentswas




substantive hann from the alleged lack of ERISA § 204(h) notice.

                  In Allred v. First Nationwide   Financial Corn., the district court held that the

"plaintiffs   must show substantive hann from lack of [ERISA]       § 204(h) notice. ..in   order to be

                                                   ~,
entitled to remedial relief' under the statute. See.           18 Employee Benefits Cas. (BNA)

2427,2433      (N.D. Cal. May 2, 1994). Here, plaintiffs do not, and cannot, make such an

allegation.

                 In ~,      pension plan participants sought to rescind plan amendments,adopted

to comply with TRA '86, which decreasedthe participants' benefit accruals, on the ground that


                                                   -21
the participants were not given notice of the amendmentsas required by section 204(h) of

ERISA.      The ~         court rejected the plaintiffs'   argument that the only proper remedy for a

section 204(h) violation is rescission of the amendment at issue. ~ at 2432,2433. In so

holding, the ~         court was persuaded by, and followed, several Ninth Circuit decisions

holding that violations of other ERISA notice provisions do not give rise to a substantive remedy

unless plaintiffs show substantive harnl. Id,-(citing Siles v. ILCWU Nat'l Ret. Fund, 783 F.2d

923,930 (9th Cir. 1986); Ellenbure: v. Brockway. Inc., 763 F.2d 1091,1096 (9th Cir. 1985); and

Blau v. Del Monte Corn., 748 F.2d 1348 (9th Cir. 1984), ~,                denied, 474 U.S. 865 (1985)).

According to the ~             court,

                  [w]hile these casesdo not specifically consider § 204(h), as
                  modified by IRS requirements, they create an atmosphere in which
                  these ERISA notice violations should be remedied equitably.
                  Therefore, given the generally equitable nature of ERISA ...the
                  Court will take equitable considerations into account in
                  determining what sort of remedy is appropriate for plaintiffs.

IQ..at 2432 (citing Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 146 (1985)).10

                  The ~          court determined that invalidating     the amendment "would have the

likely effect of disqualifying the Plan under the Internal Revenue Code." and that "this would

have drastic tax consequencesfor other plan participants, as well as for plaintiffs." 1.4. The court

thus concluded that the plaintiffs could not obtain remedial relief absent a showing that they

suffered substantive hann from inadequate notice of the plan changes. ~               at 2433; ~   &05-2

Allred   v. First Nationwide     Financial   Corn.,   18 Employee   Benefits   Cas. (BNA)   2434, 2436, 2440




10 The ~         COurtdistinguished two Seventh Circuit casesthat held that section 204(h) is self-
executing (such that any attempted amendment in violation of the statute is void @ iDi!iQ) on the
basis that they concerned "simple applications of section 204(h) alone, without any guiding IRS
interpretations or modifications." 14. (citing Production and Maint. Emolovees Local 504 v.
Roadmaster Corn., 954 F.2d 1397 (7th Cir. 1992); Davidson v. Canteen Corn., 957 F.2d 1404
(7th Cir. 1992)).


                                                        -22-
 (N.D. Cal. Aug. 2, 1994) (subsequently granting summary judgment for defendantsbecauseof

 plaintiffs' failure to show substantive hann), ~,                            97 F.3d 1458 (9thCir. 1996) (TABLE).

                     The Third Circuit also recognizes the principle that procedural violations of




 1975 Salaried Ret. P., 854 F.2d 1516,1532 (3d Cir. 1988), ~~,                                             490 U.S. 1105 (1989).

 Here, plaintiffs do not, becausethey cannot, show that they suffered any harm, let alone

 substantive hann, from the alleged lack of ERISA § 204(h) notice. Thus, it follows that

plaintiffs here are no more entitled to substantive relief than were the ~                                      plaintiffs, and Count

IV   should    be dismissed.


v.         PLAINTIFFS'               BREACH               OF        FIDUCIARY               DUTY         CLAIM         SHOULD             BE
           DISMISSED.

                    Count II of the complaint alleges a breach of fiduciary duty in violation of Section




fonner Allstate employees' eligibility                   for benefits after opting to become independent

contractors. Complaint'               108. The claim is brought on behalf of the retired agent plaintiffs and

the retired agent class, and seeks"lost benefits, future benefits, back pay, front pay and/or lost

         capital" as a remedy. ~ ,
investment                                                   15 & Prayer for Relief, D.

                    Becausethe alleged misrepresentations by Allstate are accurate and entirely

consistent with the tenns of the Plan, plaintiffs fail to state a claim for breach of fiduciary duty

under    ERISA.     In   addition,     because       plaintiffs     may     not   recover   monetary       damages     for   an alleged
                                                                                                 -)

breach of fiduciary duty under ERISA, Count II must be dismissed.

          A.        Plaintiffs       have   failed     to alle!!e    a misreoresentation               under   ERISA


                    To state a claim for breach of the fiduciary duties imposed by ERISA under 29

u.s.c.    § 1104(a), plaintiffs        must allege that Allstate made "affinnative                        material



                                                                     -71-
misrepresentations" to them "about the terms of the plan."            Bunnion      v.   Consolidated       Rail        Corn.,




108 F. Supp.2d 403,411-12 (E.D. Pa. 1999) (citing In re Unisvs Corn. Retiree Med. Benefits

ERISA Litig., 57 F .3d 1255, 1264 (3d Cir. 1995». Plaintiffs here base their claim on two

alleged representations: (I) "that fonner 'employee agents' who continued to serve Allstate

under the RJOO1 contract would no longer be able to accumulate service toward eligibility                               for

early retirement benefits or accrue additional benefits under the Pension Plan," and (2) "that

plaintiffs who continued to provide compensatedservice to Allstate under the R300 1 contract

would no longer be able to accumulate additional 'service' for purposes of eligibility for early

retirement benefits or otherwise accrue additional benefits under the Pension Plan."                       Complaint




~~   110-1




                 But the complaint makes clear that these alleged representations accurately

described amendments that Allstate had made to the Plan. ~,                 ~,     & ~ 54 ( describing 1991

amendment to the Plan which changed the definition of "employee" to exclude those providing

service under the R300 I contract, thus making their "service" ineligible under the Plan); ~ ~ 59

(describing   1994 amendments     which   retroactively      denied credit for "service"           that agents had


provided to Allstate under the R300l contract). Thus, plaintiffs are accusing defendantsof

breaching their fiduciary duties to Plan beneficiaries by truthfully and candidly reporting the

amendmentsthat had been made to the Plan. Plaintiffs simply disagree with, and challenge here,

these amendments,but that does not transfonn accurate statementsinto misrepresentations.

                 Courts have unifomlly held that communications accurately describing the temlS

of a Plan may not fonn the basis for a breach of fiduciary duty claim. ~,                     ~,       Sprague v.

                                                                                                                            "
General Motors    corn.,   133 F .3d 388,405    (6th Cir. 1998) (holding         that, "[a]s a matter of law,'


GM did not breach its fiduciary duty because what it communicated to employees "was

undeniably true under the terms of GM' s then-existing plan."); Swinney v .General Motors, 46


                                                      -24-
F .3d 512, 520 ( 6th Cir. 1995) ("Statements   that accurately   indicate    the employer's    intent at the


time are not material misrepresentations leading to a breach of fiduciary duty under ERISA.");

McMunn v. Pirelli Tire, 161 F. Supp.2d 97 (D.Conn. 2001) (holding that breach of fiduciary

duty claims are limited "to those circumstances where an employer has provided affirmatively

misleading infonuation that contradicts the tenus set forth in the ERISA Plan documents or gives

misleading, inaccurate or untruthful information     in response to a specific inquiry");      Henkin v.

AT & T, 80 F. Supp.2d 1357,1362 (N.D. Ga. 1999) (dismissing claim for breach of fiduciary

duty under ERISA where statementsaccurately described the Plan). Accurately describing the

Plan to beneficiaries is not a breach of fiduciary duty; indeed ERISA reguires fiduciaries to

provide beneficiaries with accurate infonnation      about a plan. ~        Malone v. Commonwealth

Edison Co., No.98 C 2812,1999                                 Sept. 30,1999) (Claim for breach
                                    WL 965488, at *8 (N.D. 111.

of fiduciary duty under ERISA failed because"[the fiduciary] provided [the beneficiary] with the

facts of the matter, as was his duty.") (citations omitted). Becauseplaintiffs have failed to allege

any material misrepresentationsmade to them about the terms of the Plan, they have failed to

state a claim for a breach of the fiduciary duties imposed by ERISA, and Count II should be

dismissed.

       B.      Monetary     damages are unavailable         for a breach        of fiduciary    duty under
               ERISA

               Section 1132(a)(3) ofERISA, which authorizes claims for breach of fiduciary

duty, provides that a civil action may be brought:

               by a participant, beneficiary , or fiduciary (A) to enjoin any act or
               practice which violates any provision of this subchapteror the
               terms of the plan, or (8) to obtain any other appropriate equitable
               relief (i) to redress such violations or (ii) to enforce any provisions
               of this subchapter or the terms of the plan.




                                                  -2~-
The Supreme Court in Mertens v. Hewitt Assoc., 508 U.S. 248, 113 S. Ct. 2063. 124 L.Ed.2d

161 ( 1993 ), reviewed the history and meaning of "equitable relief' and the use of that phrase in

the context of ERISA, and concluded that "appropriate equitable relief'       in subsection B of

section 132(a)(3) does not include monetary damages,but rather refers to remedies traditionally

viewed as equitable, such as injunctions or restitution.     Mertens, 508 U.S. at 256-63, 113 S. Ct. at

2068- 72. The Third Circuit has followed and applied Mertens, instructing a district court to

dismiss plaintiffs' claims for breach of fiduciary duty under ERISA where the claims sought

monetary damages. ~       Rein v. Federal DeQosit Ins. Corn., 88 F.3d 210,224 (3d Cir. 1996); ~

~   Great-Westem     Life & Annui!y   Ins. Co. v. Knudson,     122 S. Ct. 708,718   (2002) (following


Mertens and affinning   dismissal of claim for breach of fiduciary duty under ERISA that sought

to impose personal liability on defendantsbecause§ 1132(a)(3) does not authorize claims for

legal relief); Smith v. Prudential Health Care Plan. Inc., Civ. A. No.97-891, 1997 WL 746045,

at *2 (E.D. Pa. Nov. 26, 1997) (dismissing claim for breach of fiduciary duty under ERISA

because§ I I 32(a)(3) does not allow plaintiffs to seek monetary damages).

               Here, plaintiffs improperly seek monetary damages --back pay, front pay and/or

lost investment capital (Complaint, Prayer for Relief, D) --solely for themselves and other

members of their putative class of Plan participants. Thus, plaintiffs'    attempt to recover money

damagesfor themselves and their putative class to remedy the alleged breach of fiduciary duty

fails to state a claim for relief under ERISA




                                                 -26-
                                          CONCLUSION


               For the reasonsstated herein, defendants respectfully submit that plaintiffs'

complaint should be dismissed in its entirety .II

Dated: March II, 2002
        Philadelphia, Pennsylvania



                                             7espec,tfully   ~mitted,
                                                                    ~
                                             7.:;cJ            r-~            L
                                                                              '--

                                               Edward F .Manninof
                                               Katherine Menapace
                                               Attorney I.D. Nos. 04504 and 80395
                                               AKIN, GVMP, STRAVSS,
                                               HAVER & FELD, L.L.P .
                                               One Commerce Square
                                               2005 Market Street, Suite 2200
                                               Philadelphia, PA 19103
                                               Telephone:     (215) 965-1200
                                               Facsimile:     (215) 965-1210

                                              Peter A. Bellacosa
                                              Lee Ann Stevenson
                                              KIRKLAND      & ELLIS
                                              Citigroup Center
                                              153 East 53rd Street
                                              New York. New York 10022

                                               Richard C. Godfrey
                                               Sallie Smylie
                                               KIRKLAND       & ELLIS
                                               200 East Randolph Drive
                                               Chicago, Illinois 60601-6636

                                              Attorneys for Defendants




II Defendants also incorporate, as if fully set forth herein, the releaseand waiver arguments set
forth by the defendants in their motion to dismiss in Romero. et al. v. Allstate Insurance Co.. et
~, 01-CV-3894 (Fullam, J.). That motion was "denied without prejudice to reconsideration as a
motion for summary judgment" by Order dated February 28,2002.


                                                -?7-

								
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