Opinion
Case No. 2:11-cv-380
03-21-2014
Craig S. Jones, et al., Plaintiffs, v. Kerry A. Allen, Plan Administrator, et al., Defendants.
JUDGE MICHAEL H. WATSON
Magistrate Judge Kemp
OPINION AND ORDER
Plaintiffs brought this ERISA action against former employers, and certain other parties connected with the severance plans at issue in this case. Before the Court is Plaintiffs' Motion for Leave to Amend Complaint filed under seal (Doc. No. 153). For the reasons set forth below, the motion will be granted in part and denied in part.
I. BACKGROUND
Plaintiffs are former employees of one of the mortgage and investment banking entities collectively referred to as Red Capital. On May 3, 2011, Plaintiffs filed a complaint against the four entities that are collectively referred to as Red Capital, the company that acquired Red Capital on December 31, 2008 (the PNC Financial Services Group, Inc. ("PNC")), certain severance benefits plans, and the plan administrator for those plans alleging that Defendants retaliated against them for exercising certain rights pursuant to ERISA and wrongfully denied their ERISA benefits. (Doc. No. 2.) Count II of the Complaint, the retaliation claim, alleged that it was pleaded in the alternative to the claims for severance benefits. Plaintiffs alleged that they notified PNC and Red Capital of their intention to claim benefits under the 2005 National City Plan and the 2006 Severance Guaranty effective March 16, 2010, and that on the following day, offers of continuing employment were extended to all employees who had not notified their employer of their intent to seek severance benefits under the plans. Plaintiffs alleged that they were discharged in retaliation for exercising their rights as participants in the plans.
The remaining counts in the original complaint allege that Defendants wrongfully denied Plaintiffs benefits under the plans at issue. Plaintiffs claimed benefits in connection with two changes in ownership of Red Capital. The first was the purchase of Red Capital's sole owner, National City, by PNC on December 31, 2008. As to the second, Plaintiffs alleged that an investor group led by ORIX USA Corp. acquired Red Capital on May 8, 2010. (Doc. #2 at ¶30). Plaintiffs did not include ORIX USA Corp. ("ORIX") as a defendant in the original complaint.
On July 15, 2011, Defendants filed a motion to dismiss the Complaint, which was denied without prejudice. (Doc. #32; Doc. #55). On October 11, 2012, Defendants answered the Complaint. (Doc. #65). On January 24, 2013, Amy Howell, an attorney for ORIX, was deposed and testified that an individual named Jim Thompson made the ultimate decision to fire Plaintiff Russi. (Doc. 153, Exh. 3 at 142). On February 21, 2013, Plaintiffs filed a motion to Amend/Correct the Complaint. (Doc. #92). On May 14, 2013, Plaintiffs' counsel emailed Defendants' counsel to obtain the consent of Defendant "Red" to amend the pleadings to add Jim Thompson and the entity on whose behalf he was acting when he terminated Plaintiff Russi's employment. (Doc. 153, Exh. 4). According to Plaintiffs, on June 3, 2013, Defendants produced an email, which Defendants have sought to claw back as privileged based on inadvertent production, that states that "the buyer" learned of Plaintiffs' March 17, 2010 letters regarding their rights under the severance plans and demanded immediate termination of the employees who sent in the letters. (Doc. #153 at 5; Doc. #153, Exh. 1 at 68). On August 16, 2013, the Court denied Plaintiffs' motion to Amend/Correct the Complaint. (Doc. #125). On September 5, 2013, ORIX's CEO, Jim Thompson, was deposed. During his deposition he testified that when he made the decision to terminate Plaintiff Russi in March of 2010, he was making the decision on behalf of ORIX. (Doc. #153, Exh. 5 at 27).
Plaintiffs have moved for leave to make the following changes to the Complaint: (1) to add ORIX USA Corporation ("ORIX") as an additional defendant for purposes of Plaintiffs' retaliation claim, (2) to add certain additional factual allegations relating to the allegedly retaliatory nature of Defendants' actions, and (3) to assert a claim for breach of fiduciary duty against existing Defendants.
II. STANDARD
Generally, motions to amend pleadings are governed by Rule 15(a) of the Federal Rules of Civil Procedure, which provides that after the time for amending as a matter of course has passed, "a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires." Fed. R. Civ. P. 15(a). The higher standard set forth in Rule 16(b) for modifying a scheduling order only applies when a court has issued a scheduling order setting a deadline for motions to amend the pleadings. Fed. R. Civ. P. 16(b). Here, although Defendants point out that the parties' Rule 26(f) Report proposed September 15, 2011 as the recommended date for filing a motion to amend, there was no scheduling order setting that deadline for motions to amend. Accordingly, the liberal standard set forth in Rule 15(a) applies here.
Under this standard, motions for leave to amend may be denied "where the court finds 'undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of the amendment, etc.'" Marquette Gen. Hosp. v. Excalibur Med. Imaging, LLC, 528 F. App'x 446, 448 (6th Cir. 2013) (quoting Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962)). In considering what constitutes "undue delay" and "undue prejudice," the Court of Appeals has considered factors including the length of the delay, whether dispositive motions have been granted, whether the new allegations would require the opponent to expend significant additional resources to conduct discovery and prepare for trial, and whether the new allegations would significantly delay resolution of the dispute. See e.g., Parry v. Mohawk Motors of Michigan, Inc., 236 F.3d 299, 306 (6th Cir. 2000) (adding a new legal theory after the grant of summary judgment and denial of motion for reconsideration and 9 months after the filing of the first amended complaint and more than a year after the filing of the original complaint would prejudice the defendants); Phelps v. McClellan, 30 F.3d 658, 662-63 (6th Cir. 1994) ("In determining what constitutes prejudice, the court considers whether the assertion of the new claim or defense would: require the opponent to expend significant additional resources to conduct discovery and prepare for trial; significantly delay the resolution of the dispute; or prevent the plaintiff from bringing a timely action in another jurisdiction"). "The longer the delay, the less prejudice the opposing party will be required to show." Debuc v. Green Oak Tp., 312 F.3d 736, 752 (6th Cir. 2002) (citation omitted). On the other hand, "[i]n the absence of reasons such as those listed above, leave should generally be granted." Johnson v. Metro. Gov't of Nashville & Davidson Cnty., Tenn., 502 F. App'x 523, 541 (6th Cir. 2012) (citing Foman, 371 U.S. 178).
III. ANALYSIS
First, Plaintiffs request leave to add ORIX USA Corporation ("ORIX") as a defendant with respect to Plaintiffs' claim for retaliation. Plaintiffs argue that the interests of justice require that they be allowed to amend their complaint, because they "have learned ORIX (like PNC and Red) has violated ERISA by terminating their employment for exercising their rights under the various plans." (Doc. #153 at 8). The parties dispute when Plaintiffs knew or should have known enough to make that allegation.
Plaintiffs argue that "[i]t was not until Mr. Thompson's deposition in September 2013 that Plaintiffs finally learned it was ORIX who ultimately made the decision to terminate them." (Doc. #153 at 9). However, as Defendants point out, the testimony of Mr. Thompson that Plaintiffs cite is not exactly as Plaintiffs have represented. Mr. Thompson testified that he made a decision to terminate Plaintiff Russi on behalf of ORIX in March. (Doc. #158, Exh. 2 at 25:20-27:7). Mr. Thompson further testified that he did not decide to terminate the other four Plaintiffs and that the only other Plaintiff (apart from Mr. Russi) whose termination he had a role in was Plaintiff Jones, and his role was to set conditions for further employment. (Doc. #158, Exh. 2 at 35:1-38:11; 146:16-147:23). Accordingly, it appears that Plaintiffs have overstated the new facts. To the extent that Plaintiffs became aware of new evidence in 2013 regarding ORIX's alleged involvement in the facts underlying the retaliation claim, that evidence did not pertain to whether ORIX terminated all Plaintiffs, but whether ORIX terminated Plaintiff Russi, and possibly Plaintiff Jones.
As far as the remaining Plaintiffs, Plaintiffs state that prior to the beginning of discovery they "knew the Buyer Group had directed their terminations, the capacity in which the members of the Buyer Group had acted was unknown." (Doc. #153 at 4). Rather than ruling on whether that knowledge was sufficient to add ORIX as a Defendant when Plaintiffs initially filed their complaint, the Court will assume for purposes of this discussion that Plaintiffs did not have cause for their delay in seeking to add ORIX and will consider whether the delay or other factors should preclude the amendment.
"Ordinarily, delay alone, does not justify denial of leave to amend." Morse v. McWhorter, 290 F.3d 795, 800 (6th Cir. 2002) (citations omitted); see also Szoke v. United Parcel Serv. of Am., Inc., 398 F. App'x 145, 153 (6th Cir. 2010) ("[d]elay by itself is not sufficient reason to deny a motion to amend.") (citations and internal quotations omitted); Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 347 (6th Cir. 2007) ("Delay alone will ordinarily not justify the denial of leave to amend") (citation omitted). "Notice and substantial prejudice to the opposing party are critical factors in determining whether an amendment should be granted." Wade v. Knoxville Utilities Bd., 259 F.3d 452, 458-59 (6th Cir. 2001) (quoting Head v. Jellico Hous. Auth., 870 F.2d 1117, 1123 (6th Cir. 1989)). "When amendment is sought at a late stage in the litigation, there is an increased burden to show justification for failing to move earlier." Wade, 259 F.3d at 459 (quoting Duggins v. Steak 'N Shake, Inc., 195 F.3d 828, 834 (6th Cir. 1999)).
Here, Plaintiffs filed the complaint about two and a half years before filing the present motion to amend the complaint. While this is a significant delay, delay by itself is not sufficient to deny the motion to amend. Unlike many cases where two and a half years have passed, this case - and particularly the retaliation claim in this case - is not at a late stage in the litigation. That claim is not on the eve of trial, and, indeed, no trial date has been scheduled. While there have been a number of dispositive motions filed, only two of those motions were directed to the retaliation claim at issue. Neither of those motions has discussed whether particular Defendants are proper parties to that claim and the Court's rulings as to those two motions would not likely have been different had ORIX been named as a defendant on that claim.
Regarding whether additional resources would be expended to conduct discovery and prepare for trial, Defendants argue:
If Plaintiffs' proposed amendment is permitted, Defendants would be faced with reconstructing further dispositive motions and having to conduct a second round of wasteful discovery. RED has already expended substantial resources fashioning its prior document searches to Plaintiffs' existing claims and selecting and producing thousands of documents relevant to those claims.Defendants continue make additional arguments regarding the burden of additional discovery, but those are specific to the proposed new claim of breach of fiduciary duty rather than the prosed new Defendant. Defendants have not provided any explanation for why adding ORIX to the existing retaliation claim would result in burdensome additional discovery, especially in light of the fact that Defendants have pointed to paragraphs in the complaint that allege ORIX's involvement in the termination of Plaintiffs. (Doc. #158 at 7; Doc. #159 at 10). Furthermore, ORIX's CEO and an attorney for ORIX have already been deposed. There has been no showing that Defendants will have to expend substantial additional resources to conduct discovery or prepare for trial if Plaintiffs are permitted to add ORIX as a Defendant to the retaliation claim. Nor has there been any showing that adding ORIX to the retaliation claim will significantly delay the resolution of the dispute. Nor has there been any showing that Defendants would have conducted the defense in a substantially different manner had the amendment been tendered previously.
Defendants also argue that Plaintiffs acted opportunistically by waiting for the Court to rule before amending the complaint, but that argument is also directed toward the proposed new claim rather than the proposed new Defendant. (Doc. #158 at 3). Plaintiffs have not hidden their desire to add an additional entity to the retaliation claim. Rather, on May 14, 2013, Plaintiffs' counsel emailed Defendants' counsel to obtain the consent of Defendant "Red" to amend the pleadings to add Jim Thompson and the entity on whose behalf he was acting when he terminated Plaintiff Russi's employment. (Doc. 153, Exh. 4).
Defendants have also argued that the proposed addition of ORIX would be "futile from a factual standpoint." (Doc. #158 at 14; see also Doc. #159 at 14). In support of that argument, Defendants first reiterate that Mr. Thompson's deposition did not provide the evidence that Plaintiffs say it did. However, as discussed above, Plaintiffs did not need new evidence in order to add ORIX as a new defendant, because, as Defendants have pointed out, Plaintiffs' original complaint alleged facts that supported inclusion of ORIX as a defendant. Defendants also point to Mr. Thompson's deposition and additional evidence to contradict Plaintiffs' allegations that they were fired in retaliation for exercising their rights under the plans and ERISA. Whether or not allegations in the original complaint are correct, however, is not the issue. To the extent that Defendants believe Plaintiffs' retaliation claim cannot survive summary judgment, they can make such a motion. Here, the question is not whether Defendants had a retaliatory motive, but whether ORIX may be added as a defendant. Even the evidence that Defendants discuss emphasizes the role of ORIX in the decisions relating to the employment and/or termination of Plaintiffs. Accordingly, there is no evidence of bad faith or dilatory motive on the part of Plaintiffs, there has been no repeated failure to cure deficiencies by amendments previously allowed, there is no showing of undue prejudice to Defendants by virtue of allowance of the amendment, there is no showing of futility of the amendment, and the delay, though long, has not been prejudicial. Therefore, these factors, weighed together, favor permitting Plaintiffs to amend their complaint to add ORIX as a defendant.
Second, Plaintiffs seek to add "some additional factual allegations that highlight the retaliatory nature of Defendants' actions based on documents produced in discovery." (Doc. #153 at 2.) In connection with those allegations, Plaintiffs seek to add a February 17, 2010 email from William Roberts to Amy Howell and a March 19, 2010 email from David Williams as exhibits to the complaint. (Doc. #153 at 2.) Defendants marked those emails "Confidential" when they produced them. If Plaintiffs are permitted to amend the complaint to include those documents, they ask the Court to allow them to file the amended complaint without requiring it to be filed under seal. (Doc. #153 at 3.) Plaintiffs also note, in a footnote, that Defendants sought to claw back the second of the two emails as privileged after it was used in a deposition. (Doc. #153 at 5 n.7). While Defendants do discuss both of the emails and point to other evidence that Defendants believe contradict Plaintiffs' representations about the import of those documents, (Doc. #158 at 16, 18; doc. #159 at 15-17), they mention nothing about privilege or confidentiality, nor do they oppose the inclusion of those exhibits or references to them in the proposed amended complaint.
In light of the absence of any objection by Defendants and in accordance with the discussion above regarding the addition of the ORIX as a defendant, the Court finds no prejudice would result from the addition of the factual allegations based upon the February 17, 2010 email that Plaintiffs have attached as Exhibit 44 to the proposed First Amended Complaint and the March 19, 2010 email that Plaintiffs have attached as Exhibit 45 to the proposed First Amended Complaint, nor to making those exhibits part of the complaint. Defendants have not addressed the issue of privilege, and there is no formal motion asserting a privilege with respect to Exhibit 45 to the proposed First Amended Complaint. The Court must now consider whether to require that the First Amended Complaint be filed under seal.
Under the terms of the Agreed Protective Order:
If any party objects to the designation of any document or information as Confidential, counsel for the objecting party shall notify all counsel of record and any affected non-party of the objection. If a dispute regarding the objection cannot be resolved by agreement, counsel for the party objecting to the Confidential designation shall provide written notice of such fact to counsel for the party seeking the Confidential designation and specifically identify in such notice the documents or information at issue. Counsel for the party seeking the confidential designation shall have 14 calendar days after issuance of such written notice to move this Court for an order confirming confidential treatment under this Order of the documents or information in question. . . . If counsel for the party seeking the confidential designation does not move this Court for such an order within 14 calendar days of issuance of the written notice, then the documents or information identified in the notice shall no longer be covered by this Order.(Doc. #40 at ¶6). It is not clear whether the parties have sought to resolve the dispute by agreement as contemplated by the Agreed Protective Order, but in light of the fact that Defendants did not voice any opposition to Plaintiffs' assertion that the documents should not have been marked confidential, it appears that the parties are in agreement that the documents need not be filed under seal. Accordingly, the Court concludes that proposed exhibits 44 and 45 to the First Amended Complaint are not covered by the Agreed Protective Order.
The proposed amended complaint that Plaintiffs attached to their motion for leave to amend included two new paragraphs that do not fit within any of the areas as to which Plaintiffs have moved to amend. Those allegations, which appear in the retaliation claim (Count II), are the following: "Defendants have been unjustly enriched by virtue of the profits they have earned as a consequence of the consummation of the Red-Orix transaction," and "Disgorgement of profits realized by Defendants as a consequence of their scheme of retaliation and intimidation is an appropriate equitable remedy under 29 U.S.C. 1132(a)(3)." (Doc. #153, Exh. 1 at ¶¶ 261, 264). Plaintiffs only sought leave to amend to add ORIX as an additional defendant in relation to Plaintiffs' retaliation claim, to add a claim for breach of fiduciary duty, and to add additional factual allegations based on the two documents that Plaintiffs attached as Exhibits 44 and 45 to their proposed amended complaint. (Doc. 153 at 1-3). While Plaintiffs' motion and memorandum mention seeking to disgorge profits, that occurs in the context of the proposed new breach of fiduciary duty claim. The closest Plaintiffs come to mentioning their additional claims for relief in the retaliation count is in a footnote where Plaintiffs state that "[w]hile Plaintiffs have always maintained that Defendants were unjustly enriched [citation omitted] and disgorgement was already included as appropriate equitable relief under 29 U.S.C. 1132(a)(3), Plaintiffs specifically state disgorgement as an available remedy in their First Amended Complaint." (Doc. 153 at 2 n.1). If, as Plaintiffs appear to maintain, they do not need to allege specifically that disgorgement is an available remedy on the retaliation claim because they have already asked for appropriate equitable relief, then Plaintiffs will not be harmed by the exclusion of those paragraphs (¶¶ 261, 264) of the proposed amended complaint. If, on the other hand, those proposed paragraphs are essential to claiming those damages, Plaintiffs should move directly to amend the complaint to add those paragraphs and explain why such an amendment would be proper. The Court will not allow such language to be added through the procedure followed by Plaintiffs.
Third, Plaintiffs request leave to add a new count for breach of fiduciary duty. Unlike adding the proposed defendant to the retaliation count, the Court finds that adding this new claim would cause undue prejudice to Defendants. The language of Plaintiffs' proposed new claim alleges in relevant part:
402. As fiduciaries, [the Plan administrator and certain committees and designees for the plans at issue] must "discharge [their] duties with respect to a plan solely in the interest of the participants and their beneficiaries." 29 U.S.C. 1104(a)(1).
. . .
404. These individuals acting as fiduciaries for the various plans breached their fiduciary duties in numerous ways, including but not limited to (1) failing to inform Plaintiffs regarding their eligibility under the various plans; (2) failing to provide pertinent information despite requests from Plaintiffs; (3) failing to provide timely notice in accordance with the 2006 Guaranty, the 2005 National City Plan, and the Red Plan; and (4) their actions in wrongfully denying Plaintiffs' benefits claims.
405. The decisions made by these individual employees acting as fiduciaries benefitted their employers, PNC and/or Red Capital.
406. As a result of such breaches, PNC and Red improperly profited and were unjustly enriched by the actions and decisions of the fiduciaries by at least $30,000,000 for severance claims they have to date avoided paying to the Red Capital employees.
407. As a result of such breaches, PNC improperly profited and was unjustly enriched by the actions and decisions of the fiduciaries by at least $100,000,000 for severance claims it has to date avoided paying to former National City employees.
408. As a result of such breaches, PNC and Red have improperly profited and were unjustly enriched by the earnings they have realized on the amounts due to plan participants for severance benefits that have been wrongfully withheld.
(Doc. #153, Exh. 1).
In determining prejudice, a significant factor is whether permitting the proposed claim would require Defendants to expend additional resources to conduct discovery. Here, Defendants argue that "Neither Plaintiffs nor Defendants have taken any discovery related to the breaches of fiduciary duty Plaintiffs now seek to allege. [citation omitted] Rather, the focus has been on whether the denial of Plaintiffs' benefits claims should be overturned, and whether Plaintiffs were retaliated against." (Doc. #159 at 17). While the PNC Defendants "do not concede that Plaintiffs, under Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 618 (6th Cir. 1998), and its progeny, would be entitled to additional discovery on their new claim," neither do they explain why such discovery would not be permitted. The other Defendants argue that "Plaintiffs' new claim would require RED . . . expend significantly more resources searching many of its same records a second time for newly relevant materials." (Doc. #158 at 6).
Plaintiffs first respond by pointing to the facts already alleged in the original complaint. Plaintiffs argue that their proposed breach of fiduciary claim "is based upon many of the same underlying facts as their other claims, such as Defendants' failure to gather all pertinent information regarding Plaintiffs' benefits claims." (Doc. #161 at 20 (footnote and citation omitted)). However, alleging those facts in relation to Plaintiffs' claims for ERISA benefits does not necessarily entitle them to discovery of those facts. With the exception of the retaliation claim, all of the claims brought in the original complaint would typically be decided based on the administrative record alone. See Wilkins v. Baptist Healthcare Sys. Inc., 150 F.3d 609, 617-20 (6th Cir. 1998) cited in McCartha v. Nat'l City Corp., 419 F.3d 437, 441 (6th Cir. 2005) (Courts reviewing an ERISA administrative decision are typically limited to the administrative record). To the extent that the Court were to consider evidence outside the administrative record for those claims, such evidence would be limited in scope. See Moore v. Lafayette Life Ins. Co., 458 F.3d 416, 430 (6th Cir. 2006) (limited discovery beyond the administrative record may be considered "only if that evidence is offered in support of a procedural challenge to the administrator's decision, such as an alleged lack of due process afforded by the administrator or alleged bias on its part"). Here, the Court has permitted some limited conflict of interest discovery, but that ruling is fairly narrow and would not encompass all of the facts alleged relating to the ERISA claims which, according to Plaintiffs, also form the factual basis for their breach of fiduciary duty claim. And neither party has asserted that the discovery relating to the retaliation claim would overlap significantly with the potential breach of fiduciary duty claim.
Plaintiffs also assert that they "have already requested discovery related to this assertion - Plaintiffs' investigation of the conflicts under which the Committee operated and the lack of due process afforded Plaintiffs is the scope and extent of Plaintiffs' breach of fiduciary duty claim. (See, e.g., Pls.' Third Set of Interrogs. & Reqs. for Produc. of Docs. to All Defs., [Doc. # 161, Exh. 1]; Notices to Take Deps. Of Kerry Allen, James Popp, & Brian Ferguson, [Doc. # 161, Exh. 2]." (Doc. #161 at 20). However, the interrogatories and document requests that Plaintiffs cited did not address all the questions raised by the proposed amendment, such as whether Plan Administrators "(1) fail[ed] to inform Plaintiffs regarding their eligibility under the various plans; (2) fail[ed] to provide pertinent information despite requests from Plaintiffs; (3) fail[ed] to provide timely notice in accordance with the 2006 Guaranty, the 2005 National City Plan, and the Red Plan; and (4) . . . wrongfully den[ied] Plaintiffs' benefits claims." (Doc. #153, Exh. 1 at ¶404). Furthermore, the deposition notices that Plaintiffs cited indicate that the subject of the depositions would be discovery permitted by the Court's order dated March 21, 2013, which would not encompass all of the subjects relevant to the potential breach of fiduciary duty claim. In addition, there are several motions pending that seek a ruling as to the scope of the discovery. In contrast with the limited discovery beyond the administrative record that may be permitted for claims reviewing a Plan Administrator's denial of a claim, the parties have not cited, and the Court is unaware of, any authority limiting discovery in ERISA breach of fiduciary duty claims to the administrative record. Accordingly, if Plaintiffs are permitted to add the breach of fiduciary duty claim, the scope of discovery that they could seek would be much broader than the discovery permitted under the original complaint.
In addition to the potential for additional discovery, the parties have filed motions for summary judgment (docs. ##32, 38, 53), a motion for judgment on the administrative record (doc. #60), and a motion for judgment on the pleadings (doc. #86), which collectively challenge all of the counts in the original complaint. Furthermore, as alluded to above, if Plaintiffs had filed the breach of fiduciary duty claim in their original complaint, it likely would have affected some of the motions regarding discovery beyond the administrative record and might have made such motions unnecessary. Defendants also speculate that Plaintiffs were using a wait-and-see approach; however, Plaintiffs' explanation for the timing of their motion to amend the complaint to add the breach of fiduciary duty claim (the recent Court of Appeals decision discussed below) is at least as plausible as Defendants'. Accordingly, the Court is not persuaded that Plaintiffs were acting in bad faith in bringing the motion to amend at this time.
Regardless, in light of the prejudice to Defendants in combination with the significant delay in moving to amend, Plaintiffs have an "increased burden to show justification for failing to move earlier." Pittman ex rel. Sykes v. Franklin, 282 F. App'x 418, 425 (6th Cir. 2008) (citations omitted). Here, Plaintiffs argue that the recent Court of Appeals decision, Rochow v. Life Ins. Co. of N. Am., 737 F.3d 415 (6th Cir. Dec. 6, 2013), would now "allow Plaintiffs, under ERISA, to assert a claim for breach of fiduciary duty and disgorge Defendants' profits in addition to their claims for benefits." (Doc. # 153 at 6). Defendants counter that Plaintiffs could have brought a breach of fiduciary claim when they filed their complaint, because breach of fiduciary duty claims have been available since 1996. (Doc. #159 at 8). Plaintiffs reply that Rochow's ruling regarding the remedies available for breach of fiduciary duty claims broke new ground, extending the law of this Circuit, and that Plaintiffs "are clearly entitled to take advantage of intervening, ground-breaking governing law . . . ." (Doc. #161 at 15-16). Defendants have also filed a notice of supplemental authority noting that the Sixth Circuit judges have voted to rehear Rochow en banc, the effect of which is to vacate the Rochow decision. (Doc. #163).
By the time Plaintiffs filed their complaint in this action on May 3, 2011, it was already well established in this Circuit that plaintiffs could bring claims for breaches of fiduciary duty in ERISA cases, and could even do so alongside a claim for benefits in certain circumstances. Rochow, 737 F.3d at 424-25 (citing Hill v. Blue Cross and Blue Shield of Michigan, 409 F.3d 710 (6th Cir. 2005); Gore v. El Paso Energy Corp. Long Term Disability Plan, 477 F.3d 833 (6th Cir. 2007)). Rochow, which has now been vacated, states that it is a "logical extension of the Hill exception to Varity and Wilkins because §502(a)(1)(B) cannot provide all the relief Rochow seeks." Rochow, 737 F.3d at 425. While Plaintiffs may have felt more confident in seeking disgorgement following Rochow than they did when they filed their complaint, they certainly could have asserted a breach of fiduciary duty claim seeking equitable relief generally. Further, although Plaintiffs may have chosen not to bring such a claim because they did not believe they could recover money damages, the Court must still consider the prejudice to Defendants in permitting the amendment at this juncture. In light of the likelihood that Defendants will be required to expend additional resources to conduct discovery, the numerous dispositive motions that have been filed, and the two and a half years that passed between the filing of the original complaint and the filing of the present motion for leave to amend, permitting the proposed breach of fiduciary duty claim will result in substantial prejudice to Defendants. Accordingly, while Plaintiffs have advanced a colorable argument for failing to make this claim earlier, it does not rise to the level necessary to defeat the prejudice to Defendants from adding this new claim.
IV. Conclusion and Order
For the reasons set forth above, the Court grants in part and denies in part Plaintiffs' motion for leave to amend the complaint. Plaintiffs are permitted to amend the complaint to add ORIX as a defendant in relation to Plaintiffs' retaliation claim, and Plaintiffs are permitted to amend the complaint to add proposed Exhibits 44 and 45 to the proposed amended complaint and the factual allegations based on those documents. Plaintiffs are not permitted to amend the complaint to add proposed Count XIV (the breach of fiduciary duty claim), to change the wherefore clause, or to add a related substantive allegation. (Doc. #153, Exh. 1 at ¶¶ 399-409, as well as the proposed changes to the wherefore clause and ¶11). Plaintiffs are not permitted to amend the complaint to add proposed paragraphs 261 and 264, which add new requests for relief to the retaliation claim in Count II. (Doc. #153, Exh. 1 at ¶¶ 261, 264). The remaining changes made in the amended complaint, which appear to be non-substantive (extra spaces deleted, typos corrected, etc.) have not been objected to by Defendants and will be permitted. Plaintiffs shall submit their amended complaint, in conformance with the Court's ruling as to its permissible content, within fourteen days.
V. Procedure for Reconsideration
Any party may, within fourteen days after this Order is filed, file and serve on the opposing party a motion for reconsideration by a District Judge. 28 U.S.C. §636(b)(1)(A), Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 91-3, pt. I., F., 5. The motion must specifically designate the order or part in question and the basis for any objection. Responses to objections are due fourteen days after objections are filed and replies by the objecting party are due seven days thereafter. The District Judge, upon consideration of the motion, shall set aside any part of this Order found to be clearly erroneous or contrary to law.
This order is in full force and effect, notwithstanding the filing of any objections, unless stayed by the Magistrate Judge or District Judge. S.D. Ohio L.R. 72.4.
Terence P. Kemp
United States Magistrate Judge