The opinion of the court was delivered by: MIRIAM GOLDMAN CEDARBAUM
This is an action arising under provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001 et seq.. The John Blair Communications, Inc. Profit Sharing Plan (the "New Blair Plan") and two members of the committee that administers the New Blair Plan
assert claims against Telemundo Group, Inc. Profit Sharing Plan (the "Telemundo Plan"), the committee that administers the Telemundo Plan (the "Telemundo Committee"), and three members of the Telemundo Committee for earnings on investments that plaintiffs claim were wrongfully withheld from them. Plaintiffs and defendants have submitted the case for all purposes for determination by the Court on undisputed facts.
Plaintiffs claim that defendants breached a plan administrator's fiduciary duty under ERISA in two respects in calculating the accounts of participants in the New Blair Plan. Plaintiffs do not allege any deliberate misconduct or improper delay on the part of defendants in carrying out their duties. The issues raised are of statutory duty and not of overreaching.
The first claim is that in transferring assets to the New Blair Plan, defendants were required to credit appreciation of assets between the valuation date and the dates on which the actual transfers were effected. Plaintiffs' second grievance is that defendants gave effect to an election to transfer account balances from the Equity Fund to the Short Term Investment Fund as of the effective date of the election even though the actual transfers took place at a later date.
For the reasons discussed below, judgment is awarded to defendants in this action.
On April 10, 1987, JHR Acquisition Corp., now known as John Blair Communications, Inc. ("New Blair"), acquired divisions of John Blair & Company, now known as Telemundo Group, Inc. ("Telemundo"). In accordance with the Asset Purchase Agreement (the "Agreement") that governed the acquisition, John Blair & Company's profit sharing plan (the "Old Blair Plan") was split, or "spun off," into two plans, the New Blair Plan and the Telemundo Plan.
Upon the closing of the acquisition on April 10, 1987, approximately 500 of the 650 participants in the Old Blair Plan (the "transferred employees") became participants in the New Blair Plan. Those who were not transferred to the New Blair Plan became participants in the Telemundo Plan.
1. The "Transfer Dates Claim"
In order to effect the plan split, § 17.7 of the Agreement provides that
at or prior to the Closing Date, Seller shall split up the [Old Blair Plan] into two substantially similar profit sharing plans, one of which shall cover and be for the exclusive benefit of the Transferred Employees who participate therein (the "[New Blair Plan]"). The [New Blair Plan] shall provide that the transfer of employment of the Transferred Employees on the Closing Date will not be considered a termination of service for purposes of the [New Blair Plan]. Effective as of the Closing Date, Buyer shall adopt . . . [the New Blair Plan] . . . . As soon as is practicable after the Closing Date, Buyer shall cause an application to be made to the IRS for a favorable determination letter (the "Letter") with respect to the adoption of the [New Blair Plan].
Promptly after the end of the calendar quarter (the "Valuation Date") in which Buyer delivers to Seller a copy of the Letter, Seller shall cause to be transferred, in kind, from the trust under the [Old Blair Plan] to the new trust under the [New Blair Plan] the full amount of account balances in the [New Blair Plan] of all Transferred Employees whether or not such employees are vested. Each such account balance shall be adjusted to reflect investment experience (as well as distributions, expenses and contributions) under the existing [Old Blair Plan] trust from the Closing Date through the Valuation Date. If Buyer is unable to obtain the Letter, the [New Blair Plan] shall be terminated.
Under the terms of this provision, all assets of the New Blair Plan continued to be maintained in the Telemundo Plan trust and administered by the Telemundo Committee pending the delivery by New Blair of a favorable determination letter from the IRS. On February 19, 1988, New Blair obtained approval from the IRS for the New Blair Plan on condition that it adopt certain amendments to the Plan. By letter dated April 15, 1988, New Blair delivered copies of the required amendments to Telemundo.
As required by the Agreement, Telemundo proceeded to value the assets held in the Telemundo Plan trust in respect of the account balances of the New Blair Plan participants as of June 30, 1988, the last day of the quarter during which IRS approval had effectively been obtained (the "valuation date"). These assets, held in four investment vehicles, were valued as follows: $ 14,520,341.80 in the Short Term investment Fund; $ 7,766,569.98 in the Equity Fund; 63,785.91 shares of ADVO stock; and 52,941.546 debentures of J.B. Acquisition Corp. (the "valuation amounts").
On October 14, 1988, the Telemundo trustee transferred the valuation amount of the Short Term Investment Fund assets in cash to the New Blair Plan trust. During December 1988, the trustee transferred the valuation amounts of the ADVO stock and the J.B. debentures in kind to the New Blair Plan trust. The assets of the Equity Fund were held in two separate investment accounts managed by Beck, Mack & Oliver and Froley Revy Investment Co., Inc., respectively. The Telemundo trustee arranged for the transfer to the New Blair trust of cash and securities equalling one half of the valuation amount of the Equity Fund from each of these accounts (thus totalling the full valuation amount of the Equity Fund). These transfers took place in November and December of 1988. The assets transferred to the New Blair Plan in October, November, and December 1988 did not include interest on or appreciation of the assets between the valuation date and the dates on which the actual transfers took place.
Section 17.7 of the Agreement provides that
until the transfer of all account balances to the trust under the [New Blair Plan] has been carried out, benefits with respect to such account balances shall continue to be paid from the [Old Blair Plan] trust in accordance with the terms of the [New Blair Plan] and such account balances shall continue to be invested in the manner currently permitted under the [Old Blair Plan] and pursuant to the elections of the [New Blair plan] participants.
Pursuant to this provision, approximately 250 of the New Blair Plan participants (the "electing participants") elected at the end of 1987 to transfer all or a portion of their account balances from the Equity Fund to the Short Term Investment Fund. Telemundo credited and debited the electing participants' Short Term Investment Fund and Equity Fund accounts, respectively, as of December 31, 1987 to reflect the elections, and after that date, determined the account balances of the electing participants by the investment experience of the funds elected.
Telemundo did not actually transfer the $ 8,941,210.80 of assets which the electing participants chose to transfer from the Equity Fund to the Short Term Investment Fund until October of 1988. During the roughly ten-month period from the date on which the elections became effective until the actual transfers, the Equity Fund appreciated at a higher rate than the ...