The opinion of the court was delivered by: PATEL
William Mertens and other plaintiffs filed this action on September 9, 1988 and added class allegations on June 23, 1989. The complaint alleges breaches of fiduciary duty by members of the Investment Committee of the now-terminated Kaiser Steel Retirement Plan ("Investment Committee"). According to plaintiffs, who were participants in the Kaiser Steel Retirement Plan ("Plan"), the Investment Committee members failed to insure adequate funding of the Plan and an adequate funding policy and thus breached their fiduciary duties. The court's earlier orders in this matter covered these circumstances in greater detail than shall be done here.
In May 1986, twenty-four Plan beneficiaries filed an action alleging breaches of fiduciary duty by several entities and individuals, including the Kaiser Steel Retirement Plan and the Investment Committee members named as defendants in the present action. That action, denominated Horan v. Kaiser Steel Retirement Plan, CV 86-4424 PAR (Bx), was removed to federal court under ERISA jurisdiction. The Horan plaintiffs sought declaratory and injunctive relief in the form of an order that the fiduciaries purchase an annuity for each of the plaintiffs. On August 31, 1989 the United States District Court for the Central District of California granted summary judgment in favor of the defendants in Horan and issued a memorandum and order. Defendants in the present action now argue that the Horan claim, as reflected in the complaint, the briefs and evidence of the parties, and the court's memorandum and order must serve to bar the Mertens litigation on res judicata and collateral estoppel grounds.
Under Federal Rule of Civil Procedure 56, summary judgment shall be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial . . . . since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). See also T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (the nonmoving party may not rely on the pleadings but must present specific facts creating a genuine issue of material fact); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) (a dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.").
The court's function, however, is not to make credibility determinations. Anderson, 477 U.S. at 250. The inferences to be drawn from the facts must be viewed in a light most favorable to the party opposing the motion. T.W. Elec. Serv., 809 F.2d at 631.
The doctrine of res judicata bars re-litigation by parties or their privies of any claim brought to final judgment on the merits. United States v. ITT Rayonier, Inc., 627 F.2d 996 (9th Cir. 1980) (citing Montana v. United States, 440 U.S. 147, 153, 59 L. Ed. 2d 210, 99 S. Ct. 970 (1979)). The parties do not dispute that the Horan summary judgment order was a final judgment on the merits. They concentrate their energies instead on issues of identity of parties and claims.
Under the identity of parties requirement, an earlier action does not have res judicata effect on a later action unless the affected parties to the second action are the same as, or are in privity with, the parties to the first action. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5, 58 L. Ed. 2d 552, 99 S. Ct. 645 (1979).
The defendants in Mertens are indisputably the identical parties as those in Horan since they were also named defendants in that action. There is also no dispute that a subset of the Mertens class members were Horan plaintiffs and are thus the identical parties.
However defendants also contend that all other class members, including the individual plaintiffs, though not parties to the Horan action, are in privity with the Horan plaintiffs. The defendants argue that the Plan is the real party in interest as plaintiff in both suits or that the Horan plaintiffs were the virtual representatives of the Mertens plaintiffs.
According to the defendants, the Plan is the real party in interest in both Horan and the present action since the central cause of action in both is based on breach of ERISA-prescribed fiduciary duties. The defendants correctly note that a civil action alleging a fiduciary's liability under ERISA section 409 ("section 409 action"), codified at 29 U.S.C. section 1109, must be brought on behalf of the benefit plan, since no individual relief is available. In Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 140, 87 L. Ed. 2d 96, 105 S. Ct. 3085 (1985), the Supreme Court held that, while plan beneficiaries have a statutory right to bring an action for breach of fiduciary duty, any recovery inures to the benefit of the plan as a whole; the action is thus brought in a representative capacity.
Normally a party who litigates as a representative is in privity with those she represents, See, e.g., Cramer v. General Tel. & Electronics Corp., 582 F.2d 259, 267 (3d Cir. 1978). Defendants argue that the same must be true here. However, the Massachusetts Mutual court did not elaborate on section 409 suits, leaving such particulars as what protections are to be afforded to absent plan participants, beneficiaries and the plan itself to be formulated by the lower courts. This court's search of post-Massachusetts Mutual jurisprudence discloses few cases dealing with the manner in which these suits shall be handled to effectuate their representative or derivative nature.
Although the Ninth Circuit has recognized that section 409 suits must be brought on behalf of benefit plans, it has not established the necessary mechanics. See, e.g., Sokol v. Bernstein, 803 F.2d 532, 536 (9th Cir. 1986) (no right of action under section 409 for "beneficiary qua beneficiary."). The few decisions which have addressed the ...