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Brown v. Wilmington Trust, N.A.

United States District Court, S.D. Ohio, Western Division

July 23, 2018

WILMA BROWN, on behalf of the HENNY PENNY CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN, and on behalf of a class of all other persons similarly situated, Plaintiff,
WILMINGTON TRUST, N.A., as successor to Wilmington Trust Retirement and Institutional Services Company, Defendant.



         Henny Penny has filed a Motion to Intervene as a Limited-in-Scope Third-Party Plaintiff, Doc. #11. Plaintiff Wilma Brown seeks dental of this motion. For the reasons set forth below, the Court finds that, although Henny Penny is not entitled to intervene as of right under Rule 24(a) of the Federal Rules of Civil Procedure, permissive intervention under Rule 24(b) is warranted. Accordingly, the Court sustains Henny Penny's motion.

         I. Factual Background and Procedural History

         Henny Penny Corporation ("Henny Penny") is a foodservice manufacturing company. In 2014, Henny Penny introduced the Henny Penny Corporation Employee Stock Ownership Plan (the "Plan"), a pension plan designed to invest in employer securities of Henny Penny. Participants in the Plan include employees of Henny Penny, as well as employees of a few other corporations. The Henny Penny Employee Stock Ownership Trust (the "Trust") holds Henny Penny securities on behalf of the Plan Participants and was established in connection with the Plan. Henny Penny is the Settlor and Plan Sponsor and, in that capacity, has the authority to amend the Plan and appoint Trustees and Administrators.

         On November 5, 2014, Henny Penny entered into the Transactional Trustee Engagement Agreement with Wilmington Trust, N.A. ("Wilmington Trust"). Pursuant to that Agreement, Henny Penny appointed Wilmington Trust as Discretionary Trustee of the Plan. As Trustee, Wilmington Trust has the exclusive duty and discretion to manage and control the assets of the Plan. Further, the Trustee Engagement Agreement contains an indemnification clause which provides that Henny Penny, as the Plan Sponsor, is responsible for all of Wilmington Trust's defense costs "incurred with respect to[, ] any threatened or actual investigations, claims, legal proceedings, actions, suits, or arbitrations related in any way to the Engagement," unless Wilmington Trust is found to have "breach[ed] ... its fiduciary duties under Title I of ERISA." Doc. #11-2, PageID##176-77.

         This litigation arose out of Wilmington Trust's approval of the Employee Stock Ownership Plan Transaction (the "ESOP Transaction") on December 30, 2014, in which the Plan purchased, from party-in-interest sellers, 1.6 million shares of Henny Penny Stock for $165, 000, 000. Wilmington Trust, in its capacity as Trustee, represented the Plan and its participants in the ESOP Transaction and had the sole and exclusive authority in deciding whether to proceed with that transaction.

         On July 27, 2017, Plaintiff Wilma Brown, a past employee of Henny Penny and a participant in the Plan, brought this action against Wilmington Trust on behalf of the Plan and all participants of the Plan. Plaintiff alleges that Wilmington Trust, in its discretionary authority as Trustee of the Plan, breached its fiduciary duty in violation of the Employee Retirement Income Security Act ("ERISA") by causing the Plan to pay more than fair market value for Henny Penny stock.

         Plaintiff also challenges the validity of a mandatory arbitration procedure clause ("Arbitration Procedure"), which was added to the Plan by amendment in a restated version of the Plan effective as of January 1, 2017. The Arbitration Procedure provides that "any claim by a Claimant which arises out of, relates to, or concerns this Plan, . . . including . . . claims for breach of fiduciary duty [and] ERISA § 502 claims, . . . shall be settled by binding arbitration." Doc. #1-1, PageID#102. The Arbitration Procedure further provides that "[a]ll Covered Claims must be brought solely in the Claimant's individual capacity and not in a representative capacity or on a class, collective, or group basis." Id.

         Pending before the Court is the issue of whether Henny Penny should be allowed to intervene in Plaintiff's underlying action against Wilmington Trust. Henny Penny has filed a Motion to Intervene as a Limited-in-Scope Third Party Plaintiff under Rule 24 of the Federal Rules of Civil Procedure, seeking a declaratory judgment affirming the validity and enforceability of the Arbitration Procedure as applied to the claims asserted by Plaintiff Wilma Brown. Doc. #11. That motion is now fully briefed.

         II. Standing and Subject Matter Jurisdiction

         Henny Penny's sole purpose for intervention is to obtain a declaratory judgment that the Plan's Arbitration Procedure is valid and enforceable against Plaintiff. As Henny Penny notes, this is the mirror image of Count II of Plaintiff's Complaint, which alleges that this Arbitration Procedure is invalid.

         Plaintiff, however, argues that Henny Penny does not have Article III standing, nor standing under ERISA, to bring its declaratory judgment claim. Plaintiff also argues that this Court lacks subject matter jurisdiction over that claim. For the reasons set forth below, the Court disagrees with Plaintiff's arguments.

         A. Standing

         Henny Penny need not possess Article III standing because it does not seek relief beyond that which is sought by Plaintiff. In Town of Chester v. Lame Estates, inc., 137 S.Ct. 1645 (2017), the Supreme Court held that a party seeking to intervene as of right "must have Article III standing in order to pursue relief that is different from that which is sought by a party with standing." Id. at 1651 (emphasis added). Here, because Henny Penny seeks the same relief as Plaintiff- a judicial determination as to the enforceability of the Arbitration Procedure as applied to Plaintiff -Henny Penny need not establish Article III standing.

         Nevertheless, Henny Penny does, in fact, have Article III standing. Article Ill's actual controversy requirement on a declaratory judgment claim requires that "the parties have 'adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment' even though the injury-in-fact has not yet been completed." National Rifle Ass'n of Am. v. Magaw, 132 F.3d 272, 280 (6th Cir. 1997) (quoting Golden v. Zwickler, 394 U.S. 103, 108 (1969)). In this case, there is an actual controversy regarding the validity and enforcement of Henny Penny's Arbitration Procedure with respect to the claims that Plaintiff has asserted against Wilmington Trust. Plaintiff maintains that she is not bound by the Arbitration Procedure; Henny Penny disagrees. These adverse interests are immediate and real.

         Henny Penny also has standing under ERISA to bring its declaratory judgment claim. Plaintiff is correct that Henny Penny is an Employer and Plan Sponsor, and that plan sponsors and employers typically lack standing to sue under ERISA § 502(a). However, Henny Penny is also a limited fiduciary due to its authority to appoint and remove a Plan Administrator and Trustee, as well as its independent authority to amend the Plan.

         Courts have held that plan sponsors with limited fiduciary duties may bring lawsuits related to those duties. For instance, the Fourth Circuit held that a plan sponsor had standing to bring a lawsuit related to its fiduciary duty to appoint and remove other fiduciaries, and "'to monitor appropriately' those subject to removal." Coyne & Delany Co. v. Selman,98 F.3d 1457, 1466 (4th Cir. 1996). Here, Plaintiff is challenging the actions of Wilmington Trust, a fiduciary over whom Henny Penny has appointing ...

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