In re: Int;' Game Tech, ERISA Litigation, No. 3:2009cv00584 - Document 162 (D. Nev. 2013)

Court Description: See (# 163 ) RESCINDED AND VACATED BY ORDER ORDER GRANTING IN PART AND DENYING IN PART 131 Motion for Partial Reconsideration of the Court's Denial of Plaintiffs' Motion for Class Certification: GRANTED with respect to the footnote in our previous 130 Order, DENIED with respect to class certification. IT IS FURTHER ORDERED that the 147 Motion to Exclude is DENIED on the basis that the new arguments contained in the 139 Reply to the 131 Motion for Reconsideration shall be considered a separate motion. Defendants shall have 21 days of the date of entry of this Order within which to file an opposition to the arguments concerning whether this action should proceed as a derivative ERISA action. Thereafter, Plaintiffs shall have 14 days to file a reply. Signed by Chief Judge Robert C. Jones on 02/15/2013. (Copies have been distributed pursuant to the NEF - KR) Modified on 2/20/2013 (BLG).
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In re: Int;' Game Tech, ERISA Litigation Doc. 162 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 DISTRICT OF NEVADA 8 9 10 11 12 13 14 15 16 17 18 19 20 ) ) ) ) Plaintiffs, ) ) v. ) INTERNATIONAL GAME TECHNOLOGY, et ) ) al., ) ) Defendants. ) ___________________________________ ) ) RANDOPH K. JORDAN and KIMBERLY J. ) ) JORDAN, ) ) Plaintiffs, ) ) v. ) INTERNATIONAL GAME TECHNOLOGY, et ) ) al., ) ) Defendants. ___________________________________ ) CHRISTOPHER CARR, ROXANNE CLAYTON, and BRIAN BENNETT, 3:09-cv-00584-RCJ-WGC (Base Case) ORDER 3:09-cv-00585-RCJ-WGC (Member Case) 21 Plaintiffs are former employee participants in Defendant International Game 22 Technology’s (“IGT” or the “Company’) profit-sharing plan (the “Plan”) who have brought a 23 class action suit pursuant to Federal Rule of Civil Procedure 23 to allege breach of fiduciary 24 duty claims under Section 502(a) of the Employee Retirement Income Security Act of 1974 25 (“ERISA”), 29 U.S.C. § 1132(a)(2). Currently before the Court are Plaintiffs’ motion for partial 26 reconsideration (#131) and Defendants’ motion to exclude (#147). 27 BACKGROUND 28 The Plan is a voluntary defined contribution plan whereby participants make Dockets.Justia.com 1 contributions to the Plan and direct the Plan to purchase investments with those contributions 2 from options pre-selected by Defendants, which are then allocated to participants’ individual 3 accounts. While the parties disagree as to whether the terms of the Plan mandate that IGT 4 common stock (“IGT Stock”) be offered as an investment option, IGT Stock was offered during 5 the relevant period and its performance provides the basis for this suit. 6 Plaintiffs filed the amended consolidated complaint (#36) on March 10, 2010, alleging 7 several breaches of fiduciary duty under ERISA § 502(a)(2). On March 16, 2011, the Court 8 issued an Order (#80) in which we granted in part and denied in part Defendants’ motion to 9 dismiss (#40) and denied Defendants’ motion for summary judgment (#44) and Defendant IGT 10 Profit Sharing Committee’s alternative motion for summary judgment (#46). Only the following 11 claims remain: (i) Plaintiffs’ claim that IGT and the Committee breached their fiduciary duties 12 by failing to provide complete and accurate information about the IGT stock to the Plan 13 Participants (the “communications claim”); (ii) Plaintiffs’ claim that Defendants Matthews, 14 Bittman, Burt, Hart, Heisz, Matthewson, Miller, Rentschler, Roberson, Satre (collectively the 15 “Director Defendants”) breached their duty to monitor the IGT Profit Sharing Committee (the 16 “Committee”) (the “monitoring claim”); and (iii) breach of co-fiduciary duty pursuant to 29 17 U.S.C. § 1132(a)(2) with respect to (i) and (ii) (the “co-fiduciary claim”). 18 On March 16, 2012, the Court denied (#130) Plaintiffs’ motion for class certification 19 (#106), finding, inter alia, that Plaintiffs have failed to establish the commonality and typicality 20 requirements of Federal Rule of Civil Procedure 23(a) because the misrepresentation claim 21 will require individualized analysis of each putative class member’s detrimental reliance on the 22 alleged misrepresentations. 23 Plaintiffs have requested (#131) partial reconsideration of the Order (#130). 24 Defendants request (#147) that we exclude new arguments and evidence contained in 25 Plaintiffs’ reply (#139) in support of the motion for partial reconsideration (#131). 26 27 28 DISCUSSION A. Motion for Reconsideration (#131) Plaintiffs request that the Court revisit footnote 2 of the Order (#130), in which the Court 2 1 stated: 7 The Court finds it necessary to clarify that Plaintiffs cannot now base their communications claim upon “Company-wide emails and newsletters” (Pls.’ Reply Memo. at 1 (#120)) when the complaint alleges that Defendants made misleading communications to Plan participants via inaccurate SEC filings, press releases, and other specific communications with analysts and the press. (See Am. Compl. ¶¶ 76, 87, 91-97, 103-06, 108-14, 119-21, 135-37, 143 (#36).) Moreover, the Court’s previous order (#80) ruled that IGT and the Committee were fiduciaries with regard to communications regarding the Plan only to the extent that Defendants converted the allegedly inaccurate SEC filings, press releases, and other specific communications with analysts and the press into fiduciary communications. 8 Plaintiffs argue that recently discovered evidence demonstrates that their theory of the 9 case has not changed, and that there is no distinction between the Company-wide emails and 10 the allegations contained in the complaint (#36). Plaintiffs also request that the Court 11 reconsider its analysis of the issues of typicality and commonality and its decision to deny the 12 motion for class certification in light of this “recently discovered evidence.” Federal Rule of 13 Civil Procedure 60(b) provides that a court may relieve a party from an order for (1) mistake, 14 inadvertence, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud, 15 misrepresentation, or misconduct by an opposing party; and any other reason that justifies 16 relief. 2 3 4 5 6 17 To the extent that the Court appeared to categorically deny Plaintiffs an opportunity to 18 present evidence concerning possibly misleading communications in the form of Company 19 emails on the basis that such emails were not specifically referenced in the Complaint, the 20 Court may have been in error. The consolidated amended complaint (#36) alleges that IGT 21 and the Committee disseminated “the Plan’s documents and related materials, which 22 incorporated by reference, among other things, IGT’s inaccurate SEC filings, thus converting 23 such materials into fiduciary communications.” (Consol. Compl. ¶ 76 (#36).) In the motion for 24 class certification (#106), Plaintiffs failed to address the element of detrimental reliance, and 25 Defendants’ opposition (#117) thoroughly discussed whether individualized issues of reliance 26 should preclude class certification in this action. While doing so, Defendants focused on the 27 proposed class representatives’ deposition testimony that they did not rely on IGT SEC filings. 28 In their reply (#120), Plaintiffs directed the Court’s attention to deposition testimony in which 3 1 the proposed class representatives testified that they relied upon Company-wide emails and 2 newsletters which incorporated SEC filings. 3 Plaintiffs’ complaint does not specifically reference Company emails as a source of 4 allegedly misleading fiduciary communications. Instead, the complaint refers to Plan 5 documents and “related materials”, press releases, and other communications with analysts 6 and the press. (Consol. Compl. ¶¶ 76, 87, 91-97, 103-106, 108-114, 119-121, 135-137, 143 7 (#36).) As we noted in our previous Order (#80), a statement may incur ERISA liability if a 8 defendant “intentionally connects its statements about the company’s financial health to 9 statements it makes about the future of plan benefits.” Carr v. Int’l. Game Tech., 770 10 F.Supp.2d 1080, 1089 (D. Nev. 2011). In Quan v. Computer Sciences Corporation, the Ninth 11 Circuit recognized that the act of incorporating SEC filings into plan communications may give 12 rise to ERISA liability. Quan v. Computer Scis. Corp., 623 F.3d 870, 886 (9th Cir. 2010) (“[w]e 13 assume, without deciding, that alleged misrepresentations in SEC disclosures that were 14 incorporated into communications about an ERISA plan are ‘fiduciary communications’ on 15 which an ERISA misrepresentation claim can be based.”). 16 Plaintiffs’ reply (#120) to the motion for class certification (#106) stated that “Defendants 17 have not yet produced all communications from Class members and each Plaintiff that was 18 asked testified that they relied upon Company-wide emails and newsletters.” (Reply at 1 19 (#120).) Plaintiffs provide transcripts of depositions in which each Plaintiff testified that they 20 received SEC filings via email from the Company, and with varying degrees of certainty, that 21 they may have relied on these communications when making investment decisions, or that 22 they did not. For example, K. Jordan testified that he recalled an email sent to all employees 23 by IGT at the end of every fiscal quarter, and that he believed the statements contained in 24 those emails are “what this case is about.” (K. Jordan Tr. 23:2-25, 24:1-2 (#120-5).) K. Jordan 25 also stated that he thought IGT lied in e-mails to employees by stating that the company was 26 doing great and giving false projections of “where [IGT] stock is.” (K. Jordan Tr. 20:13-25 27 (#120-5).) 28 In the motion for reconsideration (#131), Plaintiffs argue that “recently discovered 4 1 evidence” that the Company-wide emails contained the text of press releases attached to SEC 2 filings and other such communications referenced in the consolidated complaint requires the 3 Court to consider those emails as fiduciary communications upon which the communications 4 claim is based. While the Court disagrees that any of this evidence is new, the Court grants 5 the motion for reconsideration to the extent that we agree that the footnote in the Order (#130) 6 was incorrect in finding that Plaintiffs cannot use the Company emails as evidence of 7 misleading communications simply because the emails were not specifically named in the 8 complaint. Those emails, which communicated press releases and SEC filing information to 9 Company employees, are encompassed by the complaint’s language, which refers to 10 materials disseminated by IGT and the Committee which incorporated by reference, among 11 other things, IGT’s SEC filings. Therefore, the Court erred in finding that Plaintiffs cannot base 12 their communications claim based upon Company-wide emails and newsletters announcing 13 SEC filings and including information about the state of the Company and IGT Stock. In our 14 Order dated March 16, 2011 (#80), the Court noted that the SPD incorporated IGT’s SEC 15 filings by reference, including those filed after the date of the SPD. If emails containing 16 misleading SEC filings, press releases, and other such information were sent to all Class 17 Members by Company emails, those emails may be the basis of a misleading communications 18 claim if class members relied upon that information to their detriment. 19 This finding, however, does not require reconsideration of the Court’s denial of class 20 certification. We denied class certification because we found that individual issues of reliance 21 in a communications claim brought pursuant to ERISA § 502(a)(2) defeat commonality, and 22 the two remaining claims, the monitoring claim and the co-fiduciary claim, are derivative of the 23 communications claim. We also found that the claims of the named plaintiffs are not typical 24 of the claims or defenses of the class, as required under Rule 23(a), because the named 25 Plaintiffs testified that they did not rely on the alleged misrepresentations referred to in the 26 amended complaint, namely, the SEC filings. All of the named Plaintiffs had also signed 27 releases by which they expressly waived the right to bring any claims under ERISA. 28 Therefore, we found that Plaintiffs’ claims are not typical of class members’ claims and class 5 1 certification must be denied. Our reconsideration of the footnote in the Order does not change 2 the analysis under Rule 23(a). While certain named Plaintiffs testified that they relied on 3 Company emails communicating SEC filings to employees, others testified that those emails 4 were not part of their investment decisions. Therefore, Plaintiffs have failed to establish the 5 typicality and commonality requirements of Federal Rule of Civil Procedure 23(a) because the 6 communications claim will require individualized analysis of each putative class member’s 7 detrimental reliance on the alleged misrepresentations. 8 B. Motion to Exclude (#147) 9 Defendants request that we exclude allegedly new matter and arguments presented in 10 Plaintiffs’ reply brief (#139) to the motion to reconsider (#131).1 In the reply (#139), Plaintiffs 11 request that the Court allow Plaintiffs to pursue the action derivatively on behalf of the Plan 12 as a whole. The Court agrees that the amended complaint (#36) and this Court’s Order (#130) 13 both contemplate that the action is brought on behalf of the Plan. Plaintiffs assert that a 14 plaintiff in a derivative ERISA action need not show personal reliance as part of a fraud and/or 15 misrepresentation claim. Plaintiffs request leave to amend the complaint if a derivative claim 16 has not been properly alleged. Defendants request that we strike this argument as it was 17 brought for the first time in a reply, and that if the argument is to be considered, Defendants 18 must be given adequate opportunity to respond. 19 Therefore, the Court shall grant the parties additional time to brief the matter of whether 20 the action should proceed as a derivative ERISA action despite our findings in the Order 21 (#130) denying class certification, and whether an amended complaint is required. Plaintiffs’ 22 request that the Court convene a status conference shall be denied at this time. 23 /// 24 // 25 1 26 27 28 Defendants’ request that we strike the “new evidence” in the reply shall be denied. The Court finds that the allegedly new evidence submitted with the reply was not new and was properly attached in response to arguments made in Defendants’ opposition. Furthermore, the allegedly new evidence included in the reply was not the basis of the Court’s findings in ruling on the motion to reconsider (#131), and therefore, the request to strike the evidence is moot. 6 CONCLUSION 1 2 For the foregoing reasons, IT IS ORDERED that the Motion to Reconsider (#131) is 3 GRANTED IN PART AND DENIED IN PART on the following basis: GRANTED with respect 4 to the footnote in our previous Order (#130), DENIED with respect to class certification. 5 IT IS FURTHER ORDERED that the Motion to Exclude (#147) is DENIED on the basis 6 that the new arguments contained in the reply (#139) to the motion for reconsideration (#131) 7 shall be considered a separate motion. Defendants shall have twenty-one (21) days of the 8 date of entry of this Order within with to file an opposition to the arguments concerning whether 9 this action should proceed as a derivative ERISA action. Thereafter, Plaintiffs shall have 10 fourteen (14) days to file a reply. 11 12 DATED: This _____ day of February, 2013. 15th 13 14 _________________________________ United States District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7