The opinion of the court was delivered by: U. S. District Judge Honorable Edward J. Lodge
ORDER ON REPORT AND RECOMMENDATION
On September 6, 2011, United States Magistrate Judge Larry M. Boyle issued a Report and Recommendation (Dkt. 89) in this matter. Pursuant to 28 U.S.C. § 636(b)(1), the parties had fourteen days in which to file written objections to the Report and Recommendation. Objections and responses to objections were filed by the parties. The matter is now ripe for the Court's review.
Pursuant to 28 U.S.C. § 636(b)(1)(C), this Court "may accept, reject, or modify, in whole or in part, the findings and recommendations made by the magistrate judge." Moreover, this Court "shall make a de novo determination of those portions of the report which objection is made." Id. In United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003), the court interpreted the requirements of 28 U.S.C. 636(b)(1)(C):
The statute [28 U.S.C. § 636(b)(1)(C)] makes it clear that the district judge must review the magistrate judge's findings and recommendations de novo if objection is made, but not otherwise. As the Peretz Court instructed, "to the extent de novo review is required to satisfy Article III concerns, it need not be exercised unless requested by the parties." Peretz, 501 U.S. at 939 (internal citation omitted). Neither the Constitution nor the statute requires a district judge to review, de novo, findings and recommendations that the parties themselves accept as correct. See Ciapponi, 77 F.3d at 1251 ("Absent an objection or request for review by the defendant, the district court was not required to engage in any more formal review of the plea proceeding."); see also Peretz, 501 U.S. at 937-39 (clarifying that de novo review not required for Article III purposes unless requested by the parties) . . . .
See also Wang v. Masaitis, 416 F.3d 993, 1000 & n.13 (9th Cir. 2005). In this case, both sides object to the Judge Boyle's recommendations.
Plaintiffs in this action are the Trustees and named fiduciaries of Building Materials Holding Corporation's (BMHC) BMCC Employees Savings & Retirement Plan ("the Plan"), and BHMC itself, as the Plan Sponsor and a Plan fiduciary. Defendant is ING Life Insurance & Annuity Company ("ILIAC"), who formerly held invested Plan funds and performed related administrative services.
This litigation concerns the replacement of ILIAC with another contracted provider, Prudential Retirement ("Prudential"), and an apparent failure of communication regarding the transfer of over $100 million of Plan funds upon the termination of ILIAC's services. Plaintiffs allege that because Prudential did not receive the funds before 4:00 p.m. on the date of transfer, Prudential was unable to reinvest them into the market which resulted in a $375,790.16 loss to the Plan which Plaintiffs seek to recover from ILIAC.
In their complaint, Plaintiffs allege breach of fiduciary duty under several provisions of ERISA and under Idaho state law, negligence, promissory estoppel and breach of contract. ILIAC moved for summary judgment on Plaintiffs' claims for breach of fiduciary duty under ERISA, which this Court granted. See Report and Recommendation dated June 6, 2010 (Dkt. 53); Order Adopting Report and Recommendations dated July 22, 2010 (Dkt. 58). Now pending is Defendant's Motion for Summary Judgment (Dkt. 63). Judge Boyle recommended Defendant's motion for summary judgment be granted as to Counts Three (Breach of Fiduciary Duty), Four (Negligence) and Six (Promissory Estoppel), but denied as to Count Five (Breach of Contract).
As of January 23, 2008, ILIAC served as the record keeper and custodian of several retirement plans for Plaintiff, including "the Plan" at issue in this case. PSOF, ¶ 1.
The assets of the plans were invested primarily in mutual funds on the New York Stock Exchange, which are valued once a day, based upon the price of the stock at the close of the market at 4:00 p.m. Eastern Time (ET). Plaintiff's Statement of Facts In Response to ILIAC's Motion for Summary Judgment Filed on October 20, 2010 ("PSOF")(Dkt. 69-1), ¶ 2. Funds must be invested prior to 4:00 p.m. ET to be valued at that day's closing price. Id. When being transferred from one custodian to another, the funds must be received by the new custodian before 4:00 p.m. ET, otherwise they are treated as received the next day and invested at the next day's market price. Id.
In connection with the holding of the assets, ILIAC issued a Group Annuity Contract ("Contract") to the Plan trustees which contained a "payment" provision. This provision, Section 8.06 of the Contract, governed the transfer of the funds from ILIAC to the new custodian, Prudential, upon termination of the Contract. Statement of Undisputed Material Facts Supporting Defendant's Motion for Summary Judgment on Remaining Counts in Plaintiffs' Complaint ("SUMF") (Dkt. 64-1), ¶ 5; Plaintiffs' Response to ILIAC's Motion for Summary Judgment Filed on October 20, 2010 (Clerk's Docket 63) ("Plaintiff's Response to MSJ") (Dkt. 69), p. 6. This provision states:
The Company will make Payments as directed by the Contract Holder, a Participant or such other authorized party, as applicable. Payment requests must be in writing or as otherwise allowed in administrative practice.
Id.; Declaration of David C. Tarshes Regarding Plaintiffs' Response to ILIAC's Motion for Summary Judgment Filed on October 20, 2010 ("Tarshes Decl."), Exh. O.
The following series of written correspondence encompassed the parties' communications about the transfer. On January 23, 2008, Mark Kailer of BMHC, one of the trustees for the plans, wrote to Carol Decker of ILIAC, stating: "Please be advised that BMHC will be terminating our service agreement with ING Financial Advisors and its Affiliates and transferring the plans listed below to Prudential effective May 1, 2008." PSOF, 69-1, ¶ 4, Tarshes Decl., Exh. TT.
On January 28, 2008, Ian Dunn of ILIAC wrote to Cynthia Shehan of BMHC, copying a representative of Prudential, as follows:
[W]e will also require a letter signed by an authorized trustee advising us to liquidate the assets. The letter should include the requested effective date of the liquidation (valid business day), wire date (next valid business day following the liquidation) as well as transfer instructions (either wire instruction or check payee & mailing information) and a reason for leaving ING.
Please know that forwarding assets to a new carrier by check is a 3-day process plus mailing time, however, the wiring of assets would occur the business day following the surrender.
Wire instructions need to include the Bank Name, City & State of Bank, Account Name & Number, ABA Number.
PSOF, ¶ 5, Tarshes Decl., Exh. P (emphasis added). Mr. Dunn testified in deposition that "the business day will typically -- not typically, but does end at 4:00 p.m. eastern time." Id.
On February 28, 2008, Ian Dunn and Carol Decker from ILIAC, and Russell Wilhelm and Sandra Krapfl of Prudential, participated in a conference call to "discuss the mechanics of ILIAC's transfer of the money" in the Plan to Prudential. DSUMF, ¶ 13; PSOF ¶ 6. In preparation for the conference call, Prudential created a spreadsheet entitled "Transition Questions," that did not address the specific time of the wire transfer. DSUMF, ¶ 14. The participants to the conference call confirmed that ILIAC would liquidate the funds on April 30, and wire the funds to Prudential on May 1. PSOF, ¶ 6. None of the participants recall any specific discussion that the funds had to be received by Prudential by 4 p.m. on May 1. DSUMF, ¶¶ 16, 17; PSOF, ¶ 6. However, Mr. Wilhelm believes, and will testify, that he followed Prudential's standard practice, which was to inform the prior record keepers/custodians that funds being transferred must reach Prudential prior to 4:00 p.m., so that they can be reinvested that same day. PSOF, ¶ 6.
On March 26, 2008, John O'Donnell of ILIAC wrote to Mark Kailer of BMHC, setting forth a schedule relating to the ...