COURT FILE NO.: 11-CV-433052
DATE: December 18, 2012
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
WILLIAM MORGAN
Plaintiff
– and –
SARA LEE OF CANADA NS ULC, SARA LEE CORPORATION OF CANADA LTD.., and SARA LEE CORPORATION, SARA LEE FOODSERVICE LTD. SERVICE ALIMENTAIRE SARA LEE LTEE, TANA CANADA INC. and HANESBRANDS CANADA NS ULC
Defendants
Geoffrey D.E. Adair, Q.C. and Alexa Sulzenko for the Plaintiff
Proceeding under the Class Proceedings Act, 1992
HEARD: In writing
REASONS FOR DECISION
PERELL, J.
[1] This is a proposed class action under the Class Proceedings Act, 1992, S.O. 1992, c. C.6.
[2] The proposed Representative Plaintiff, William Morgan, sues on behalf of all former members of a defined benefit pension plan known as the Fuller Brush Company Revised Retirement Plan Number 1 registered with the Financial Services Commission of Ontario under Registration Number 0253971, which plan was provided to employees of the Fuller Brush Company. Mr. Morgan sues for 100% of the plan’s surplus.
[3] Mr. Morgan (born October 18, 1933) is currently 79 years old. He worked for Fuller Brush for more than 30 years, starting in or about 1956.
[4] On May 1, 1961, effective January 1, 1961, Fuller Brush adopted a plan for providing retirement income benefits for eligible employees, as set out in the Fuller Brush Company Retirement Plan 1 dated May 4, 1961. The Plan is a defined benefit pension plan regulated by the Financial Services Commission of Ontario ("FSCO") pursuant to the Pension Benefits Act, R.S.O. 1990, c.P.8.
[5] From January 1, 1961 until the date his employment ended, Mr. Morgan was a member of the Plan. After his employment ended in 1990, he became a former member of the Plan.
[6] In accordance with the Plan, Fuller Brush signed a Trust Agreement with the Royal Trust Company of Canada. Thereafter, contributions made by Fuller Brush and its successors were paid to Royal Trust or its successors. The funds were held in accordance with these "Original Plan Documents." The original documents provided that the Plan is for the exclusive benefit of the employees. The original Plan provides in Article VII(7) that on a Plan termination, no assets may revert to the Company until all benefits of members have been settled.
[7] In the Original Plan Documents, Fuller granted itself a general power to amend the Plan but only where doing so would not result in any part of the funds reverting to Fuller Brush or being used for purposes other than the exclusive benefit of employees.
[8] In this proposed class action, Mr. Morgan alleges that notwithstanding the above provisions of the Plan, Fuller Brush amended it and the Trust Agreement from time to time in a manner that purported to reserve surplus to Fuller Brush.
[9] In 1988, Sara Lee Corporation of Canada Ltd. became the successor to Fuller Brush. It subsequently closed down certain divisions of Fuller Brush, resulting in the loss of employment to a number of then members of the Plan. On April 1, 1992, Sara Lee partially wound-up the Plan with respect to these members.
[10] In or about September 1992, the Plan's Actuary reported that there existed a surplus of $2,388,000.00 of which $634,000.00 was attributable to the members affected by the partial termination.
[11] Since the date of the partial wind-up of the Plan in 1992, there has been a surplus in the Plan, a portion of which is attributable to the members affected by the partial wind up. The remainder of the surplus is attributable to the Class Members in the "full wind up group".
[12] In July 2006, Sara Lee prepared a Notice of Application and sent it to the proposed Class Members, stating that it proposed to apply to the Superintendent of FSCO to withdraw the surplus from Plan 1, and on August 24, 2006, Sara Lee invited the former members of Plan 1 to sign a Surplus Sharing Agreement to the effect that fifty percent of the surplus would be paid to the former plan members, while the other fifty percent would be paid to Sara Lee.
[13] In September 2006, the employer and administrator under the Plan became Tana Canada Inc. Around the same time, Sara Lee changed its name to Hanesbrands Canada NS ULC.
[14] On May 24, 2007, Tana announced its intention to fully terminate and wind-up the Plan and sought the approval of FSCO to do so.
[15] On or about December 22, 2009, Tana sent a notice to all former members of the Plan advising that all members had accepted the Surplus Sharing Agreement but that FSCO has requested more information from Sara Lee, which delayed the distribution.
[16] On or about August 5, 2010, FSCO raised a concern that the Notices of Application that Tana had provided to the former plan members were defective because they did not include the texts of the Original Plan Document or the Trust Agreement from 1961.
[17] On or about April 1, 2011, assets of Tana were sold and Sara Lee Foodservice Ltd. Service Alimentaire Sara Lee Ltee assumed sponsorship of Plan 1.
[18] On or about April 15, 2011, Sara Lee Foodservice sent the former plan members the letter stating that FSCO had requested that it provide additional historical Plan documents to the Superintendent which, at that time of the initial Notice of Application, were not in the Company's possession.
[19] On January 21, 2011, Sara Lee Foodservice changed its position, and it advised FSCO that it would not rely on the provisions of the plan documents as entitling it to any share of the surplus. However, it instead purported to rely on the original consent obtained to the Surplus Sharing Agreements that had been sent out years before.
[20] In April 2011, Mr. Morgan retained Adair Morse LLP to act on his behalf to pursue payment of 100% of the surplus. Numerous other former members of the Plan also retained Adair Morse LLP, as did several former members of another Fuller Brush Pension Plan known as Fuller Brush Company Revised Retirement Plan No. 2 registered with FSCO under Registration No. 025989 ("Plan 2").
[21] Class actions were brought to recover 100% of the surplus in the plans. Mr. Morgan commenced his action on or about August 17, 2011. Mr. Morgan alleged that under the Plan documents, Class members are collectively entitled to be paid 100% of the surplus monies existing in Plan 1.
[22] On July 24, 2012, the parties to both actions attended a judicial mediation. The parties arrived at a settlement as follows:
• The Defendants agreed to pay 100% of the surplus in each plan to Plan Members respectively as their interests determined by the Plan Actuary appeared. Cheques would be issued to Plan 1 Members as soon as practicable. Cheques would be issued to Plan 2 Members as soon as practicable following settlement approval and FSCO approval.
• The Defendants agreed to the extent permitted by law to make individual arrangements as requested by pensioners to make payments in such a way as to minimize income tax or OAS claw backs.
• The Defendants agreed to repay $170,000 taken out of surplus for legal fees paid to their lawyers. This money would be paid directly to the pensioners if permitted by law and otherwise to be paid to Plans and added to surplus.
• The Defendants agreed to pay $180,000 by way of legal costs.
• The pensioners had the right to appoint an individual to review and audit Plan records on the understanding that monies removed by the Defendants (if any) contrary to the Plan documents would be repaid so as to increase the surplus. The pensioners reserved all rights to claim punitive damages for any monies removed through wilful misconduct or fraud.
[23] Through further discussion, this settlement was refined into the form of a Settlement Agreement that has been signed by all of the parties. The Settlement Agreement modifies the settlement reached at the mediation in the following ways:
• Members of Plan 1 or Plan 2 or their representatives have 90 days from the date of the agreement to undertake a review of the funded status of either plan at their own expense.
• Upon court approval of the settlement, the Defendants shall pay for the benefit of the members of Plan 1 and Plan 2 a total of $350,000.00 inclusive of costs and interest, to be paid as follows:
o Up to $3,500.00 will be paid out of the set total of $350,000 for expenses incurred by any Plan 1 or Plan 2 Class Member in pursuing the review of the funded status of either Plan. All such other expense is to be borne by the Member or Members pursuing the said review.
o All or part of the remaining funds shall be paid to plaintiffs' counsel in the Plan 1 and Plan 2 actions in full or partial satisfaction of their claims for fees, disbursements and applicable taxes, all as approved by the court.
o The amount remaining, if any, shall be divided as follows: 25% for the benefit of Plan 1 members affected by the partial wind up; 36% for the benefit of Plan 1 members affected by the full wind up; 19.5% for the benefit of Plan 2 members affected by the full wind up; and 19.5% for the benefit of Plan 2 members affected by the partial wind up.
o Such amounts shall be paid at the Defendants' option into either the respective plan funds to augment the surplus in such plans to be distributed by way of lump sum payment in accordance with the wind up reports or by way of lump sum payment directly to the plan members in the same proportions as surplus is allocated in the final revised wind up reports.
[24] Adair Morse LLP continued to act for the former members and beneficiaries of Plan 1 and Plan 2 through the completion of a judicial mediation. A few days after the completion of the mediation, the proposed Representative Plaintiff for the Plan 2 action, Michael Scime, changed counsel for unknown reasons.
[25] Approximately a dozen former members of Plan 1 or their beneficiaries attended the mediation, and all approved the terms of the settlement at that time.
[26] Mr. Morgan now seeks certification of the action as a class proceeding for the purposes of settlement. The Defendants consent.
[27] The proposed class definition is as follows:
All members, former members, past members, annuitants and beneficiaries (and the estates, heirs, successors, beneficiaries, assignees and representatives thereof) of the Fuller Brush Company Revised Retirement Plan Number 1 Registration No. 0253971 (the "Plan").
[28] The parties have agreed to the following common issues, which are proposed for certification for the purposes of settlement:
(a) To whom should the surplus funds remaining in the Plan upon wind up of the Plan be paid?
(b) What, if any, amounts were improperly paid out of the Plan in connection with expenses incurred in attempting to arrive at and implement surplus sharing agreements?
(c) What, if any, amounts should the Defendants be ordered to pay in respect of punitive, exemplary or aggravated damages?
[29] The form of Notice of Certification and the Opt Out Coupon have been agreed upon by the parties. Notice is to be achieved by a direct mailing to class members.
[30] I am satisfied that the action meets the test for certification as a class proceeding for the purposes of settlement, and that the form of Notice of Certification should be approved.
[31] I grant the motion and I have signed the Certification Order.
Perell, J.
Released: December 18, 2012
COURT FILE NO.: 11-CV-433052
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
WILLIAM MORGAN
Plaintiff
‑ and ‑
SARA LEE OF CANADA NS ULC, SARA LEE CORPORATION OF CANADA LTD.., and SARA LEE CORPORATION, SARA LEE FOODSERVICE LTD. SERVICE ALIMENTAIRE SARA LEE LTEE, TANA CANADA INC. and HANESBRANDS CANADA NS ULC *
Defendants
REASONS FOR DECISION
Perell, J.
Released: December 18, 2012.