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  • Campbell v. Whobrey

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    Fatima Hussein
    59 vizualizări38 pagini
    A group of participants in the Central States Pension Fund are suing the fund's director and trustees for breach of fiduciary duty for failing to consider a proposal to remove their employer, Kroger Co, from the plan.

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    A group of participants in the Central States Pension Fund are suing the fund's director and trustees for breach of fiduciary duty for failing to consider a proposal to remove their employer, Kroger Co, from the plan.

    Drepturi de autor:

    © All Rights Reserved
    Descărcați ca PDF sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    59 vizualizări38 pagini

    Campbell v. Whobrey

    Încărcat de

    Fatima Hussein
    A group of participants in the Central States Pension Fund are suing the fund's director and trustees for breach of fiduciary duty for failing to consider a proposal to remove their employer, Kroger Co, from the plan.

    Drepturi de autor:

    © All Rights Reserved
    Descărcați ca PDF sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    din 38
    ‘Case: 1:16-cv-04631 Document #: 1 Filed: 04/25/16 Page 1 of 38 PagelD #1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION DORIS CAMPBELL; TIMOTHY CAMPBELL; DARRELL CHILDRESS; DENNIE COOKE; JOE HIGHFIELD; RUSSELL LEE: WAYNE MOORE; BRAD DAVIS; AL HERNANDEZ; PAT NUGENT; AND RANDY SPILLMAN, Plaintit, No, ‘The Honorable _ CHARLES A. WHOBREY; GEORGE J. WESTLEY; MARVIN KROPP; ARTHUR H. BUNTE, JR. GARY F. CALDWELL; RONALD DESTEFANO; GREG R. MAY; ‘THOMAS NYHAN; and CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, Defendants COMPLAINT NATURE OF ACTION 1. Plaintfs bring this lawsuit to obtain redress for breaches of fiduciary duty tht, if left unchecked, will devastate their retirement security 2. Plainifs are participants inthe Central States, Southeast and Southwest Areas Pension Plan (he “Plan), a multiemployer defined benefit pension pan as defined inthe Employce Retirement Income Security Act of 1974 (“ERISA”), with participants fom a varety Findus, 3. The Plan is massively underfunded. Iti in critical and declining status under 29 USC. § 1085. ‘Lis projected to be insolvent by the year 2026 or before i it continues payirg, benefits at current levels, assuming investment returns that outpace its historical performance Case: 1:16-cv-04631 Document #: 1 Filed: 04/25/16 Page 2 of 38 PagelD #:2 4, Because ofthis projected insolvency, the Plan’s Board of Trustees filed an application with the U.S. Department ofthe Treasury on September 25, 2015, seeking approval of aplan to reduce benefits under the Multiemployer Pension Reform Act of 2014 (MPRA) the ~Besefits Reduction Plan), The Benefits Reduction Plan proposes cuting many Plan participants’ benefits by upto 60% oF more from the amount they eared and were promised pursuant othe terms ofthe Plan in effet prior tothe Benefits Reduction Plan. The Benefits Redaction Plan would drive many existing retires and thee families, inching retires in their seventies with no prospects for future ermployment, into poverty 5. Based on its investment results since the Benefits Reduction Plan was fled, the Plans likey to become insolvent even with the cuts proposed inthe Benefits Reduction Plan. 6. The Plan's die condition is a source of grave concer for many. irs and foremost, the Plan's participants ae already suffering reductions in their eamed pension benefits, and ace an imminent threat of draconian reductions inthe future, followed eventually by the Plan's complete collapse, Local union that represent those participants are concerned about their members’ retiement security, and in particular, the erosion of ther pension benefits asthe Plandectnes, Employers of participants find themselves making massive contributions for benefits thee employees will ever see, And the goverment, including the United States Pension Benefit Guaranty Corporation ("PIG"), risks being lft with the aftermath ofthe Plans eventual collapse —assuming the Plans collapse does not take the PBGC down with it 7. Plaintfs are part of group of Plan participants all of whom work for The Kroger Co. Kroger") or are retired from Kroger and were covered by the agreement negotiated ‘on behalf of current employees (the “Kroger Participants"). The International Brotherhood of “Teamsters (“IBT™) represents the Kroger Participants in bargaining. The IBT, on behulfof its Case: 1:16-cv-04631 Document #: 1 Filed: 04/25/16 Page 3 of 38 PagelD #3 ogee Partisipans, negotiated & proposal to remove Kroger Participants from the Pan, and create a new plan to provide the Kroger Participants with stable ull funded pensions the “Proposal” 8. The Proposal doesnot come a the expense of the other participants in the Plan Under the Proposal, Kroger andthe IBT would not only create @ new, stable defined-benefit pension plan forthe Kroger Participants, but would also remove liabilities from the Plan and result in Kroger’ paying a withdrawal lability that exeeeds its eurent obligations tothe Plan ‘Thus in adion to flly protecting the Kroger Panicipants the Proposal would improve the Plan’ financial status, and leave every participant inthe Plan in the same ora better position than they would be in without the Proposal. Kroger has even agreed to pay more in connection With the Proposal, if necessary to accomplish its goal of a more secure retiement forthe Kroger Participants 9. Inaddition, employees of Kroger’s third party logistics providers (companies that provide services to Kroger) who are curently participating in the Plan, wil be given the ‘opportunity © negotiate through their collective bargaining representatives to join the new IBT/K roger plan, 10, The Plan's Trustes have flatly refused 1 consider the Proposal to preserve the benefits ofthe Kroger Participants without harming other Plan parisipants, The Pan's Executive Director, Thomas Nyhan, has written that the “the [Plan] has a fiem policy against {acttatng employer withdrawals in any way.” without any apparent consideration of whether those withdrawals ould he sirctured to be neutral toward, or even beni, the Plan, 11. The Trstoos rejected the Proposal in less than five days. ‘The fat tha the ‘Trustees took so little time to reject a complex Proposal clearly demonstrate that the Trustees Case: 1:16-cv-04621 Document #: 1 Filed: 04/25/16 Page 4 of 38 PagelD #:4 did not consider the Proposal on its merits and id not meaningfully investigate whether the Proposal would benefit the Plan's participants. 12, In rejecting the Proposal as not inthe Plan’s interests in fess than five days, Defendants did not bother to even attempt to negotiate a deal that would provide greater benefit to the Plan than those offered in the Proposal. This i true notwithstanding Kroger’s offer to sbsorb increased withdrawal liability to ensure that all participants are inthe same or a better position than they would otherwise be because of the Proposal 13, The Trustees’ refusal to con ide the Proposal or even attempt to negotiate favorable modifications to the Proposal harms the Plan's participants and violates ERISA. 14, inthis lawsuit, Plaitits seek an order tht will requte independent conside-ation. and negotiation of the Proposal. Plaintiffs ask thatthe Court appoint an independent fiduciary to review the Proposal and determine whether it is inthe best interest of Plan participants and, to the extent the independent fiduciary determines thatthe Proposal, as curently structured, isnot inthe best interests of Plan participants, to negotiate with Kroger for an arrangement that isin the best interests of Plan participants. In addition, Plaintiffs request an accounting: a declaration thatthe Trustees have violated their fiduciary duties under ERISA; other injunctive relief; restitution and damages; and attorneys fees. 15, Plaintiffs" request is urgent. Ifthe Plan does not take further action on the Proposal by the deadline (currently expected tobe June 15, 2016), then Kroger and the IBT will hhave no obligation to go through with the Proposal, andthe Kroger Participants will be trapped ina Plan that is about to cut their benefits dramatically and stil faces likely insolvency. ‘Case: 1:16-cv-04631 Document #1 Filed: 04/25/16 Page 5 of 38 PagelD #:5 JURISDICTION AND VENUE. 16. This Cout has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331 and ERISA § 502{eX(1), 29 USC. § 1132(eX(1). 17, ‘This Cour has personal jurisdiction over Defendants pursuant to ERISA § 502(e)(2), 29 US.C. §1132(€\2), which provides that his ation may be brought in the distrit where the Plan isadministeed, and process may he served in anyother district where a defendant resides or may be found. All Defendants reside in or may be found inthe United Sates, 18. Venue is proper inthis distiet pursuant o ERISA § 501(e\(2), 29 USC §1132(¢)2), because the Plan is administered in this distct, some oral ofthe fiduciary breaches for which reliefs sought occured inthis district, and the Plan maintains its primary place of business in his cstrict, FACTUAL BACKGROUND Plains 19, Plaintiffs re Kroger Participants who are retired, or ae planning for retirement, and are facing dramatic in their retirement benefits under the Benet Reduction Plan 20, Plait xe injured by belonging ta disordered and chaotie Pan, All Plains are facing worry, sess nd uncertainty about their futures and ther retirements, Plaintiffs worry thatthe Benefits Reduction Plan may push them into poverty or othe precarious nancial sitwations that force a dramatic change in their standards of living 21. Asa group of United States Senators recognized ina fetter tothe Treasury Department about the Benefits Reduction Plan participants inthe Plan “contributed to their pensions over the course of many years — making the sacrifices of giving up better pay or Case: 1:16-cv-04631 Document #: 1 Filed: 04/25/16 Page 6 of 38 PagelD #6 improved benefits, oF even staying ina physically exhausting job that took them away from their families” so that they could ear the pension they now may lose under the Benefits Reduction Plan, (Ex. 7.) The Senators recognized that there is “no doubt tat rtirees wil face e significant ‘burden asa result of” the Benefits Reduction Plan. fd 22. Plaintiffs who are not yet retired are experiencing lst opportunites to retire, and are being force to delay their retirements. Those who are already retired may be forced back {tothe workforce. 23. Plaintiff Dennie Cooke has worked at Kroger since 1973, and participates in the Plan, Mr. Cooke lives in Fishers, Indiana. Mr. Cooke performs factory work, making a variety of dairy products and completing other factory tasks. His fory-three years of fictory work have taken atoll on Me. Cooke's knees, which have both been replaced theough surgery. Mr. Cooke wants to retire to avoid puting farther stress on his body, but he cant do so beau ofthe significant pending benefits cus he expects o take effect under the Benefits Reduction Plan, If the Trustees dont approve the Proposal, he wil be forced to continue abusing his knees with factory work; the Proposal would allow him to retire and fee secure. 24, Plaintiff Timothy Campbell worked for Kroger fom 1994 until his retirement in 2015, and participates inthe Plan. Mr. Campbell ives in Redford, Michigan, Mr. Campbell performed maintenance on factory equipment, such as bottle fillers and dairy process equipment, and made plastic bottles using blow molds. Mr, Campbell is already retired and may not recover bis lost pension income i he isnot allowed to leave the Plan under the Proposal and the Benefits Reduction Plan goes ino effet. 25, Plaintiff Doris Campbell is married to Plaintif Timothy Campbell She has ‘worked for Kroger since 1982 and also participates in the Plan. Mrs. Campbell ives in Redford, Case: 1:16-cv-04631 Document # 1 Filed: 04/25/16 Page 7 of 38 PagelD #:7 Michigan. She vad hoped to join her husband in retirement i 2017, but she is Facing severe reductions unde the Benefit Reduction Pan. The eduction Mrs, Campbell will face under the ‘Benefit Reduction Plan is compounded because Mr. Campbell's pension is also being ext Because her husband i already retired, his options for making up lst income ae tiited and Mrs. Campbell willbe forced to continue to work to help make up the losses in both her and het husband's pensions. Ifthe Proposal isnot approved, Mrs. Cammpll doesnot know if she wil ever be able orate 26, Phin Nugent worked for Kroger and participatd in the Plan fr forty years before he retired in 2015, Mr, Nugent lives in Martinsville, Indiana, Mr, Nugent performed variety of jobs a Kroger trom stacking boxes, to filling containers of icecream, to flavoring ice ream, to helping with general plant and warehouse needs. Mr, Nugent may not beable to recover his ost pension income if he s not transfered tothe new Kroger plan and the Benefits Reduction Plan goes into effet. While he had hoped to retire and stay retired, he now expects that he will haveto find parttime work to make up forthe income he will lose under the Benefits Reduction Plan. 27. Phat Joe Hightield has worked at Kroger and partsipate in the Plan forbs entre career, begining in 1984, Me Highfield lives in Westland, Michigan. Me. Highfield worked as filer for hll-gallon cartons of milk: made cottage cheese and yogurt; and worked in Shipping and Receiving. The Proposal is crucial to protecting Mf. Highfield and his family. If the Proposal gos ino effect, Mr. Highfield's accrued benefit will emain unchanged an he wil be able to retire yeas earlier than ihe is forced to remain inthe Plan. Me. Highfields pension allows him to suport his wife and five children, including one child who has cerebral palsy and Case: 1:16-cv-04631 Document #: 1 Filed: 04/25/16 Page 8 of 38 PagelD #:8 will never beable to live independently. Ifthe Proposal isnot approved and the Benefits Reaction Plan goes into effet, Mr Highfield doesnot know if he will ever be ble to retire 28, Plaintiff Wayne Moore has worked at Kroger and participated inthe Plan since 1984, Me. Moore ive in Howell, Michigan, He stayed at Kroger fr so lng partly because of the pension he expected. Mr, Moore and his wife bought home in the country, expecting 9 retire young and have years to enjoy thei retirement. Now, Mr. Moore and his wife have realized that thei retirement isnot secure and that they cannot ely on receiving any pension from the Plan. They have tured tei attention to earning more money to support themselves because they expect to lose Mr. Moore's pension, After spending some time as homemaker, Mr. Moore's wife has gone back to work, also in an attempt co mitigate the isk of los retirement income, Their retirement plans have been put on hold indefinitely 29, Plaintiff Darell Childress has worked at Kroger and participate in the Plan since 1984, Mr. Childress lives in Indianapolis, Indiana. Mr. Chiress has performed a variety of ‘warchouse jobs, such as Safety Coordinator, Forklift Operator, Sanitation, and Machine Operator. He intially planned to retire under the now-eliminated 30-and-out program. Retirement has become less and less achievable for Mr. Childress as the Plan's condition has declined and the Plan has eliminated benefits. If Me. Childress could count on receiving his full averued benefit, he would retire within the next year. Because of the Benefits Reduction Plan and the Plan's general precarious situation, Mr, Childress must delay his retirement and keep working Mr. Childress wants to retire and enjoy life while he is healthy, but he now fears that he will be forced to Keep working, letting years that should have been part of his retirement slip, by. Case: 1'16-cv-04631 Document #: 1 Filed: 04/25/16 Page 9 of 38 PagelD #:9 30. Plaintiff Brad Davis has worked at Kroger ad participated inthe Plan since 1992. Mr. Davis lives in Hutchinson, Kansas. Mr. Davi is a Warchouseman who runs a forklift end ships and reeives groceries. Mr. Davis planned to retire in 2024 a age 60, but i the Trustes do ‘not approve the Proposal, he will key be freed to keep working until he cannot work any’ longer because he is worried that his pension will not be secure 31. Plaintiff Randy Spillman has worked at Kroger and participated inthe Pan since 1979, Me. Spillman lives in Hutchinson, Kansas. Mr. Spillman has spent essentially hs entire ‘career at Kroger, except fora period of military service, and isthe Crew Chief inthe Maintenance Department at a grocery warehouse, Mr. Spillman planned o retire witia the next to years, but ithe isnot allowed to leave the Pan forthe new Kroger plan and the Berefts Redvet Plan goes int eect, he will ned to work for yeats longer. 32, _PlaintfPAl Hemande2 worked for Kroger in various warehouse jobs from 1973 unt 2009. Mr Hemande lives in Hutchinson, Kansas. He is curently retired and receives a pension ftom the Plan. Ifthe Benefits Reduction Plan goes into effec, it will cut Mr. Hernande2's my ly benefit and have dramatic impact on Mr, Hemande2’s standard o living. Mr. Hemande hasbeen retired for seven years. He fears that ihis pension i ut, he wil be forced to find workin retirement, ad that he wil have fimited earning power now that he has been out ofthe workforce 33, Plaintiff Russll Lee has worked at Kroger since 1989 ina varity of jobs at the Crossroads Farm Dairy. Mr, Lee lives in Camby, Indiana. Under the Proposal, he wosld be able to retire about a decade earlier than ihe stays in the Plan, and would be more confident that, he will receive ‘ull, stable benefits through his retirement. Case: 1:16-cv-04621 Document #: 1 Filed: 04/25/16 Page 10 af 3 PagelD #:10 34. Under the Benefits Reduction Plan, each Kroger Partiipant in the Pan faces ‘dramatic cuts to his or her etrement benefits. The Plan provides examples of poterial ets under the Benefits Reduction Plan in its application tothe US. Department of the Treasury. Cuts to Kroger Participant fall within the Plan's Tie 2 cus, These cuts are drastic. The Plan's examples of Tier 2 ews range from a 31% toa 71% reduction in acerved benefits 35. Thus, based on the Plan's examples of Tier 2 cuts, an ative, retire, ce beneficiary participant who has less than twenty years of Contributory Serviee and has earned an acerued benefit of $2,138.31 per month would see a cu to $1,467.52, not accounting for additional euts based on early retirement or other factors. A Tier 2 active, etre, or beneficiary participant who has less than twenty years of Contributory Service and has eamed ar accrued benefit of $1,480.05 per m ‘would se a cut to $1,015.76, A Tier? active, retire, or beneficiary participant who has twenty or more years of Contributory Service and has eared an accrued benefit of $850.35 per month would see a cut to $425.18 per month, A Tiee2 terminated vested participant who has less than 20 years of Contributory Service ands eamed an accred benefit of $475.42 per month would soe a eut 0 $118.86 per month. A Tier2 terminated vested participant who has twenty or more years of Contributory Service and has cared an accrued benefit of $241.80 per month would se that benefit eut to $120.9 per month 36. Many ofthe named Plaintiffs have already received letters noifying tiem ofthe benefit cuts they would face under the Benefits Reduction Plan, which are consistent with the severe proposed cuts described by he Pan in its application 37, Forexample, Plaintif Timothy Campbell curently receives a Plan pension benefit of $1,789.67 but he has received notice that his benefits will be cut t0 $1,371 30 under the Benefits Reduction Plan. The Plan told him that if the Plan becomes insolvent, his PBGC- Case: 1:16-cv-04631 Document #: 1 Filed: 04/25/16 Page 11 of 38 PagelD #:11 _2uaranteed pension will be $728.41, and that ifthe PBGC becomes insolvent, hs benefit will be sentially zero.” Similarly, Plaintiff Doris Campbells currently eligible for a monthly pension benefit of $2,634.16 if she retires on May 28, 2025, but she has received notice that her benefits willbe cut to $1,706.48 under the Benefits Redction Plan, ‘The Plan told her that ifthe Plan becomes insolvent, her PBGC-guaranteed pension will be $1,119.87 and that if the PBGC ‘becomes insolvent, her benefit wil be “essentially 270." 38. Plain Pat Nugent currently receives a pension benefit fom the plan of $2,798.54 per month, but he has received noice that under the Benefits Reduction Plan, his benefit wil be reduced 1,558.25 per month, He has received notice from the Plan that his PBGC-quaranteed pension is $1,416.59 and tat “i the PBGC runs out of money, a is now projected, your benefit would be essentially zero.” 29. Plant Wayne Moore is curently eligible fora monthly pension benefit of $2,527.49 ie retires on March 19, 2026, but he has received notice tha his benefits willbe ext {0 $1,687.66 under the Benefits Reduction Plan. The Plan told him that if the Plan becomes insolvent, his PBGC:guaranted pension wil be $1,084.12, and that if the PBGC becomes insolvent, his benefit will be “essentially zero. 40. Plaintiff Brad Davis is eligible fora monthly benefit of 1,696.12 per month ithe retires on August 18,2029, He has received notice that under the Benefits Redaction Pan, his ‘benefit will be reduced to $1,288.08. The Plan told Mr. Davis that ifthe Plan becomes insolent, his PBGC-guaranted benefit willbe only $793.65 per month, and that ithe PBGC becomes insolvent, his benefit would be “essentially er0." 41, Plaintiff Randy Spillman is curently eligible fora monthly pension benefit of| $2,933.44 per month, assuming a July 13, 2021 retirement date, but he has received notice from Case: 1:16-ev-04631 Document #: 1 Filed: 04/25/16 Page 12 of 38 PagelD #12 the Plan that under the Benefits Reduction Plan, his benefit willbe reduced to $1,633.08 per month. The Plan told Mr Spillman that if the Plan becomes insolvent, his PBGC-guaranteed benefit will be only 1,255.72 per month, and that ifthe PGC becomes insolvent, is benefit ‘would be “essentially 240." 42, Plaintiff Russel Lee is curently eligible fora monthly pension benefit of $1,469.14 if he retires on March 2 2029, but he has received notice that his benefits will be cut ‘$1,087.00 under the Benefits Reduction Plan. The Plan told him that ifthe Plan becomes insolvent, his PBGC-quaranteed pension will be $893.75, and that if the PBGC becomes insolvent, his benefit will be “essentially zero.” 43, Plaintiffs bring claims both on behalf of the Plan pursuant to ERISA § $02(a)(2), 29 U.S.C. § 1132(a)(2), and in their individual capacities pursuant to ERISA § 502(a}3), 29 USC. § 11321898). Defendants 44, Defendants Charles A. Whobrey: George J. Westley; Marvin Kropp: Adthur H. Bune, Jr: Gary F, Caldwell; Ronald DeStefano; and Greg R, May are Trustees and named fiduciaries of the Plan and made the decisions at issue here, They are referred to collectively as the “Trustees.” 45, Defendant Thomas Nyhan isthe Executive Director ofthe Plan. Director Nyhan is included asa defendant because, as Executive Director ofthe Plan, he is necessary 10 effectuate the equitable relief requested in this complaint 46, ‘The Plan isa defendant tothe extent that its participation is necessary to effectuate the equitable relief requested in tis complaint, 47, The Trustes, the Plan, and Nyhan are collectively referred to as “Defendants.” Case: 1:16-cv-04631 Document #: 1 Filed: 04/25/16 Page 13 of 38 PagelD #:13, The Plan 48. The Plan was erated in 1985 to provide pension benefits to members ofthe IBT inthe trucking industry, and eventually was expanded to include numerous employers in numerous industies 49, Currently, the Plan is one ofthe nation’s largest multiemployer Taft-Harley defined benefit pasion plans, commonly called multiemployer plans. As of 2013, ithad 407,713 partcipents working in or retire from a variety af industries across the county. 50, Mulkemployer plans are plans maintained bys labor union and more than one employer pursuant to collective bargaining agreements, usually within the same of related industries. tn costeast to a pension plan funded and maintained by a single employer, @ ‘multimpoyer plan is funded by contributions from multiple employers whose employees then receive their pension benefits from the pooled assets ofthe multirmployer plan 51. Anumber of contracts affect multiemployer pension plans. Typically, employers agree to participate inthe plans through a collective bargaining agreement with an employees” union. The amount ofthe employer's contribution is usualy set by a collective bargaining agreement that specifies a conteibution formula and schedule, while the benefits available to participants are defined inthe plan's governing documents 52. Kroger national grocery store chain and one ofthe employers that paticipates inthe Plan. Specifically, certain Kroger employees are represented by the IBT and participate in the Plan pursuanttoa master collective bargaining agreement, Kroger has participated inthe Plan since atleast 1970. Case: 1:16-cv-04631 Document #* 1 Filed: 04/75/16 Page 14 of 38 PagelD #:14 53. According to public comments by the Plan, approximately 5,000 former and active Kroger employees participate in the Plan, and contributions made on behalf of active Kroger employees are approximately 2.5% of the Plan's total contribution revenue. 54. In addition, the former and active employees of a numberof third-party logistics providers that provide services to Kroger participate in the Plan, Plan Administration 35, The Plan is administered pursuant to a Trust Agreement, which was entered into as of March 16, 1955, and has been periodically amended (the “Trust Agrecment), and pension plan document, entitled “Central States, Southeast and Southwest Ares Pension Pan,” effective January 1, 1985, which also ha been periodically amended (the “Pension Plan Document”) 56. The Trust Agreement and Pension Plan Document designate an eight-member Board of Trstes to administer the Plan. 157. The Trustees are named and functional fiduciaries ofthe Plan, with direct authority over the administration ofthe Plan and control over Plan assets, Te Trust Agresment stats thatthe Trustees have the power and authority to contrl and manage the operation and administration ofthe Plan in accordance with applicable law. The Trustees must hold, manage, care for, and protect the Plan's assets, 58. Similarly, the Pension Plan Document slates “the Board of Trustes has authority to contol and manage jointly the operation and administration ofthe Pension Fund and of this Pension Plan in accordance withthe terms ofthe Trust Agreement and ofthis Pension Plan and amend thereof, including the authority to establish and effectuate funding policies and ‘methods consistent wit the objectives ofthis Pension Plan, and including the authority provided Case: 1:16-cv-04631 Document #1 Filed: 04/25/16 Page 15 of 38 PagelD #:15, by the Trust Agreement to allocate responsibilities forthe operation and administration of the Pension “und and of this Pension Plan.” ‘The Trustees also have certain deliteated obligations ‘eating collective bargaining agreements. Among other things, when provided with a collective bargaining agreement ("CBA") between an employer and its employees, the Trustees ust engage in evaluation of its merits and either acoopt or reject the CBA those meri 59. Considering the Proposal sa fiduciary function, In deciding whether to acceptor reject the Proposal, orto atempt to negotiate an even better deal for participants, the Trustees are exercising discretionary authority over the management of the Plan and Plan assets, which is a core fdusiay function under ERISA. Accordingly, the Trustees are subject 9 ERISA’s fiduciary duties in making that decision. On information and belie, the Trustees also used Plan assets in eaching and communicating thee decison. 60. Pursuant to the terms of the Trust Agreement, Director Nyhan is responsible to the Trustees for coordinating the administeation of Plan assets, office and personnel, forthe coordination and administration of accounting and actuarial services, fr the preparation ofall reports and other documents required tobe fled or issued in accordance with law, fo the performance of ministerial duties in conformance therewith, and for such other duties duly assigned o him by ation ofthe Trustees. Upon information and belie, Director Nyhan partieipated inthe decisions tissue here and, in consultation with ort the disction ofthe “Trustees, prepared and sen correspondence to Kroger and IBT rejecting the Froposl 61, Pursuant to consent decrees between the Plan and the United States Department of Labor in Frank E, Fitzsimmons, etal, No, 78 C 342 (N.D. IIL); Peres v, Robbins, tal, No. 78 '€ 4075 (ND. IIL}; and Peres v. Dorman, et al, No. 82 C 7951 (N.D. Il), an Independent ‘Special Counsel has access tothe Plan's files and meetings, and supervises the Plan's (Case: 1:16-cv-04631 Document #:1 Filed: 04/25/16 Page 16 of 38 PagelD #:16 compliance with the consent decrees. The Independent Special Counsel makes quarterly reports to the cour (curently to Judge Shadur) pursuant to those decrees. See, e.g. Chao v Estate of Firsimmons, 349 F. Supp. 24 1082, 1083 (ND. Il, 2004), opinion clarified, No. 78 C 342, 2008 ‘WL 3094821 (N.D. Il Dec. 9, 2004), The Plan's Decline 62. The Plan has declined precipitously over the last thee decades. Acconding to the Plan's public comments, in 1980, 11,687 employers participated inthe Fund. As of 2015, only about 1,500 employers remained (63. Many factors have contributed othe Plan's decline. The Plan's Application for Benefit Suspension filed with the US. Department ofthe Treasury states that the Plan's decline ‘began with the passage ofthe Motor Caricr Actin 1980, The ensing deregulation of the trucking industry caused many employers who had participated in the Plan to fail. In 1999, the tracking industry further declined due toa price collapse in the used truck market, skyrocketing fut prices, and an ongoing river shortage, In adltion, the Plan was adversely affected by the Financial market collapses in 2000 and 2008 (4. This overall deine has eroded the benefits available under the Plan. Effective January 1, 2008, the Trustes amended the Plan to provide that the conribution-based benefit acerued by a participant would be reduced going forward from two percent of the employer's Contributions on a participant's behalf to one percent of those contributions. In addition, the “Trustees froze early retirement and “years of service and-out” pensions and froze the various “Classes” of Contributory Service Pensions. Despite these changes, the Plan remained underfunded, (Case: 1:16-cv-04631 Document #: 1 Filed: 04/25/16 Page 17 of 38 PagelD#:17 65. The Plan’ deterioration continued ater the 2004 amendments, most precipitously ‘when the Plan suered investment losses of $7.6 billion in 2008 alone de tothe Financial ers 66. After the Pension Protection Act of 2006 (the “PPA”) took effect in 2008, the Plan's actuary cettcd the Pla to bein critical stats, a designation for plans that are citer (1) less than 65 percent funded, and whose plan assets plus contributions for the current pl and each ofthesix succeeding plan years are les than the benefits and expenses projected tobe payable during that period; or (2) expected to experience a funding deficiency inthe current year ori the next tre years 67. 1.2009, as eesult ofthe stock market declines and global economic eis, the Plan was not ory cetfed tobe in ertical status under PPA, but was als projected to become insolvent. The Pan's actuaries projected thatthe Plan would become insolvent in 2022, 68 Byany measure, the Plan is severely underfunded 69. Central States lot one third of its assets between 2007, when it had $27 billion, and 2014, wher it had assets of $17.8 billion with liability for promised benefits of $25 billion. Iris currently paying out approximately $3.46 in pension benefits for every dolla it recives through contibations. 70. Mos ecentl, the Plan was projected to become insolvent by 2026 or before iit continues paying benefits at current levels 71, Befendants say thatthe Plan needs an $11 billion government bailout avoid the cuts in the Benefit Reduction Plan, Case: 1:16-cv-N4841 Document #* 1 Filed: 04/25/16 Page 18 of 38 Pagel? #18 The Proposal 72. Recognizing that remaining in the woubled Plan i nt inthe best interests of the Kroger Pericipants, Kroger and the IBT began negotiating altematives that would provide more secure pensions forthe Kroger Participants without harming the remaining Plan participants 73, Asaresult ofthese negotiations, Kroger and the IBT signed a memorandum of understanding on March 20, 2015, (Exhibit 1.) 74, Pursuant to the memorandum of understanding, Kroger and the IBT agreed 19 create a new defined benefit pension plan, and to tanste all abilities for paying benefits to the Koger Patcipants to this new plan. Unless Kroger and the IBT agroc to extend the deadline, the new plan willbe formed only if the Pan accepts the Proposl, pursuant fo the Memorandum ‘of Understanding between Kroger and the IBT, on or before the dea Kroger and the IBT. he intial deadline in the memorandum of understanding is May 1, 2016, ‘but Kroger and the IB are in discussions about extending the deadline to une 15, 2016 75, The Proposal contemplates a spi-of¥ of retiree and active liabilities of Kroger, consistent with ERISA § 4211(), fom Central States a new IBT Kroger multiemployer plan Kroger has committed to significant up-front funding ofthis new plan, ad fal funding within three yeas 76. Under the Proposal 6 All esponsibility for paying the Kroger Paticipants’ benefits would be transfered to the now, Krogerfunded plans b. Central States would retain al ofthe assets that have been contributed by Kroger inorder to fund those be its, and ‘Case: 1:16-cv-04631 Document #1 Filed: 04/25/16 Page 19 of 38 PagelD #:19 . Central States would receive more than Kroger is statutorily required to pay in withdrawal ibility — Kroger proposed two additional years’ worth of withdrawal bility, and has indicated it would be willing to negotiate en even larger payment 77 ‘The Proposs! would fll satisfy Kroger’ liabilities under ERISA. The Proposal does not requir any transfer of Central States" assets to Kroger, and assures Cental States that it will eceve ata minimum the equivalent of twenty-two years of withdrawal ibility payments (oo additional years of payments beyond what is required by ERISA). Kroger has futher ‘offered to discuss any modifications that Defendants believe may be necessary to ensure that the Proposal results inan improved cash postion fo the Pan 78, The Proposal would provide the Kroger Participants with fully-Runded retirement plan, resting in nearly complete benefit security without the cus propose inthe Benefits Reduction Plan or the likely risk of insolvency the Plan faces 79, Te Proposal also would improve the Plan's financial postion, Ifthe Plan agrees to the withdrawal and transfer of abilities, Fiailties willbe remaved from the Plan without any corresponding dimsnishment in Plan assets. The funded position ofthe Plan wil immediately improve because liabilities will decrease. In addition, the Plan will be relieved of its obligation to pay benefits to Kroger Participants, eliminating a significant cash lability ofthe Plan Partcipans believe it likely thatthe Plan's benefit payment obligations to Kroger Participants exceed the statutory withdrawal lability payments that Kroger would make if Kroger ft the Plan witheu the Trustees" cooperation, but the Trustees have not provided tothe IBT or Kroger the data necessary to confirm that that is the case, despite equests thatthe Trustees do so. Case: 1:16-cv-04631 Document #1 Filed: 04/25/16 Page 70 of 38 Pagel #:20 80. Kroger's offer to provide at least the equivalent of twenty-wo yeas" worth of withdraw ability payments would provide the equivalent of 10% more than the Plan will et if, asthe Pan expects, Keoger simply withdraws without transferring is participants to @ new plan 81. However, the most important benefit the Proposal offers the Plan i that the Plan will immediatly cease to have an obligation to pay benefits to Kroger retirees. Among the largest hurdles tothe Plan’s stabilizing its financial position isis negative cash low. This negative ccsh flow results from the fact that, onan ongoing bass, the Plan pays out more to fulfil its benefits payment obligations than i takes i fom its only two Sources of funds — employer contributions and investment earnings, This would be tra even with the proposed benefit redictions. Each dolar spent paying benefits inthe shor term hastens the Plan's ‘ultimate insolvency because it not omly reduces the Plan's current ascts, but also diminishes the Plan's ability to eam investment income on a going forward basis. Using the Plan’ assumption cof 7.3% snnual investment return, for example, kesping $1 inthe Plan today would mean that, five yeas from now, the Plan would be beter aff by SI.48, Using the same assumptions, paying ‘out SI lessin benefit payment obligations today isthe equivalent of receiving $4.25 twenty years from now. 82, In contrast if he Proposal is rejected and Kroger withdraws from the Plan, Kroger wil make level withdrawal lability payments for twenty years pursuant to ERISA, 29 US.C. § 15396), while the Plan continues to deplete its poo! of investible dallas paying benefits tothe Kroger Participants, 83. Thus, the Proposal is specifically designed to put the Plan in better position than it would bein if Kroger simply withdrew fom the Plan without a spin-off of benefit payment 2» Case: 1:16-cv-04631 Document #: 1 Filed: 04/25/16 Page 21 of 38 PagelD #:21 liabilities to a new IBT/Kroger plan, Ata minimum, the Plan would reccive the value of two sudiional years” worth of withdrawal ibility payments. But the Proposal has the potential tobe ‘wor significantly more. First, Kroger has indicated that itis prepared to conscer paying even more than twenty-two years" worth of withdrawal lability. Second, if, asi posible, the

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