Breach of Fiduciary Duty Claim Denied Class Certification

June 24, 2005 (PLANSPONSOR.com) - A federal judge has turned down a request by a group of former employees of a paper and lumber company to certify as a class action their lawsuit that charges the company breached its fiduciary duty by not properly informing them that responsibility for their retiree benefits was being transferred to a new undercapitalized owner.
By PS

US District Judge Gene Carter of the US District Court for the District of Maine, however, approved three other claims against Bowater Inc.leveled by the 15 former employees as class actions.

According to Carter’s opinion, two of the Bowater plants were sold to a new corporate owner, Inexcon, who began paying the retiree benefit obligations, but stopped in September 2002 due to financial difficulties.   Bowater did not assist in the funding of the liabilities.   The employees reported that claims for benefits were denied and their subsequent appeals were also denied.  

Plaintiffs allege Bowater should still be held accountable for their health and welfare claims because it had promised them in union contracts that they and their dependents are entitled to    “…medical coverage and other ‘welfare’ insurance benefits within the meaning of ERISA, with no premiums to be paid by the bargaining unit employee…for the employee’s lifetime.”  

The breach of fiduciary duty claim alleges that Bowater did not get the approval of the affected retirees to transfer financial responsibility to Inexcon. Further, the plaintiffs charge that Bowater didn’t get a liability release for the retirees’ benefit claims and didn’t tell the retirees that Inexon didn’t have enough money to pay the $102 million worth of retiree health and welfare benefit obligations it had assumed when it bought the company. However, Carter ruled that different retirees relied to a differing extent on Bowater’s representations to them about the provisions of their retiree health and welfare coverage, so their claims should not be tried together as a class.

Nonetheless, Carter approved as class actions the plaintiffs’ other claims including one that Bowater violated the Labor Management Relations Act (LMRA) by not meeting the promises it made in a labor contract. The court ruled that the number of eligible employees satisfied the requirements for number of persons represented and commonality of claims, and it was not believed that a conflict of interest existed that would prevent the named employees from representing the classes.

>Carter’s opinion in Coffin v. Bowater Inc., (D. Me., No. 03-227-B-C, 6/21/05 is  here .

-Rebecca Moore

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