United States District Court, D. South Carolina, Greenville Division
The Michelin Retirement Plan and the Investment Committee of the Michelin Retirement Plan, Plaintiffs,
Dilworth Paxson, LLP, BFG Socially Responsible Investments, Ltd., Burnham Financial Group, Inc., Burnham Securities, Inc., COR Fund Advisors, LLC, GMT Duncan, LLC, Greenberg Traurig, LLP, Thorsdale Fiduciary and Guaranty Company Ltd., U.S. Bank National Association, Valor Group Ltd., Wakpamni Lake Community Corp., Wealth-Assurance AG, Wealth Assurance Private Client Corporation, Timothy B. Anderson, Jon Michael Burnham, Devon D. Archer, Bevan T. Cooney, Hugh Dunkerley, Jason W. Galanis, John P. Galanis, Gary T. Hirst, Frankie D. Hughes, and Michelle A. Morton, Defendants.
OPINION & ORDER
M. HERLONG, JR. SENIOR UNITED STATES DISTRICT JUDGE.
matter is before the court with the Report and Recommendation
of United States Magistrate Judge Jacquelyn D. Austin, made
in accordance with 28 U.S.C. § 636(b)(1)(B) and Local
Civil Rule 73.02 of the District of South
Carolina. Plaintiffs allege numerous causes of
action arising from misappropriation of funds from their
ERISA retirement investment accounts. Pending before the
court are: (1) Plaintiffs' motion to stay; (2) Michelle
Morton's (“Morton”) motion to stay or, in the
alternative, for extension of time to answer the complaint;
(3) Greenberg Traurig, LLP's (“Greenberg”)
motion to dismiss; (4) COR Fund Advisors, LLC's
(“COR”) motion to dismiss; (5) Dilworth Paxon,
LLP and Timothy B. Anderson's (collectively, the
“DP Defendants”) motion to dismiss; and (6) the
Chicago Transit Authority Retiree Health Care Trust's
(“RHCT”) motion to intervene. In her Report and
Recommendation, Judge Austin recommends granting the motions
to stay, denying Morton's motion for an extension of time
as moot, and denying the remaining motions, with leave to
refile. (R&R 8-9, ECF No. 203.)
Factual and Procedural History
Michelin Retirement Plan (the “Plan”) is an
employee welfare benefit plan governed by ERISA. (Compl.
¶ 1, ECF No. 1.) The Plan was established and is
maintained by Michelin North America, Inc. (Id., ECF
No. 1.) The Investment Committee of the Michelin Retirement
Plan (the “Investment Committee”) is a fiduciary
of the plan. (Id. ¶ 2, ECF No. 1.) The
Investment Committee entered into an Investment Management
Agreement with Hughes Capital in 1999. (Id.
¶¶ 4, 36, ECF No. 1.) Through the agreement, Hughes
Capital managed and invested Plan funds. (Id. ¶
37, ECF No. 1.)
August 22, 2014, and August 26, 2014, Hughes Capital utilized
$8, 102, 154 of the Plan's funds to purchase a Wakpamni
Lake Bond (the “Bond”) from the Wakpamni Lake
Community Corporation. (Compl. ¶ 39, ECF No. 1.) Hughes
Capital notified the Investment Committee of the purchase on
September 2, 2014. (Id. ¶ 41, ECF No. 1.)
letter dated October 10, 2014, the Investment Committee
terminated its Investment Management Agreement with Hughes
Capital and directed Hughes Capital to transfer the
Plan's portfolio, except for the Bond, to Northern Trust
Investments, Inc. (Id., ECF No. 1.) The Investment
Committee requested that Hughes Capital dispose of the Bond
in the most efficient way possible. (Id., ECF No.
1.) The Plaintiffs allege that they were led to believe that
Hughes Capital was attempting to dispose of the Bond.
(Id., ECF No. 42.) However, Hughes Capital never
disposed of the bond. (Id. ¶ 42, ECF No. 1.)
allege that the Bond was part of the Defendants' scheme
to fraudulently misappropriate funds from retirement
investment groups. (Id. ¶ 45, ECF No. 1.)
Additionally, Plaintiffs allege that the Defendants conspired
to create fraudulent or fake bonds, control entities involved
in handling the bonds, acquire ownership and control of the
investment management companies to steal retirement funds,
direct other investment funds to invest in the bonds, and use
the revenues from the bonds to create a “slush
fund” for the benefit of the Defendants. (Compl.
¶¶ 43-117, ECF No 1); (R&R 4-5, ECF No. 203.)
addition to this case, there are numerous related actions
pending in other courts. A related criminal case, United
States v. Jason Galanis, et al., 16 Cr. 0371 (R.A.)
(S.D.N.Y.) (Galanis), is pending in the United
States District Court for the Southern District of New
York. Defendants Morton, Jason W. Galanis,
(“Jason Galanis”), John P. Galanis, Devon D.
Archer, Bevan T. Cooney, Hugh Dunkerley, and Gary T. Hirst
are also charged in that case. On January 19, 2017, Jason
Galanis entered a guilty plea, which included a monetary
judgment and forfeiture in the amount of $43, 277, 436.00.
Galanis, (Jan. 19, 2017 Order, ECF No. 124.) Jason
Galanis is currently scheduled for sentencing on August 11,
2017. Galanis, (Apr. 28, 2017 Order, ECF No. 177.)
Additionally, the Securities and Exchange Commission has
filed a related civil case, Securities and Exchange
Commission v. Atlantic Asset Management, LLC, 15 Civ.
9764 (WHP) (S.D.N.Y.) (AAM), based on the same
fraudulent scheme. The AAM court has approved a
Revised Jointly Proposed Plan of Distribution (the
“Distribution Plan”), with directions that the
parties submit a status report on its completion by September
15, 2017. AAM (Apr. 24, 2017 Order, ECF No. 196).
January 23, 2017, Morton filed a motion to stay and extend
the time to file an answer. (Morton Mot. Stay, ECF No. 30.)
Morton seeks a stay until the resolution of her criminal
charges in Galanis. (Id. at 2, ECF No. 30.)
Plaintiffs also filed a motion to stay on February 6, 2017.
(Pls. Mot. Stay, ECF No. 62.) Plaintiffs requested a stay for
either 120 days or until Jason Galanis is sentenced and the
Distribution Plan is approved. (Pls. Mem. Supp. Mot. Stay
1-2, ECF No. 62-1.)
February 7, 2017, Greenberg filed a motion to dismiss.
(Greenberg Mot. Dismiss, ECF No. 67.) RHCT filed a motion to
intervene on February 9, 2017. (RHCT Mot. Intervene, ECF No.
87.) On February 9, 2017, the DP Defendants filed a motion to
dismiss. (DP Defs. Mot. Dismiss, ECF No. 91.) COR filed a
motion to dismiss on May 4, 2017. (COR Mot. Dismiss, ECF No.
200.) On May 10, 2017, Magistrate Judge Austin issued her
Report and Recommendation, recommending granting the motions
to stay with the requirement that the Plaintiffs provide a
status update within sixty days regarding the AAM
and Galanis cases and denying the remaining motions
with leave to refile. (R&R 8-9, ECF No. 203.) Greenberg
filed objections on May 23, 2017. (Greenberg Objs., ECF No.
209.) On May 24, 2017 the DP Defendants, RHCT, and COR filed
objections. (DP Defs. Objs., ECF No. 211); (RHCT Objs., ECF
No. 212); (COR Objs., ECF No. 213.) Plaintiffs replied to
Greenberg's objections on June 6, 2017. (Pls. Reply
Greenberg Objs., ECF No. 216.) On June 7, 2017, Plaintiffs
replied to the DP Defendants' objections. (Pls. Reply DP
Defs. Objs., ECF No. 217.) This matter is ripe for
Discussion of the Law
to the Report and Recommendation must be specific. Failure to
file specific objections constitutes a waiver of a
party's right to further judicial review, including
appellate review, if the recommendation is accepted by the
district judge. See United States v. Schronce, 727 F.2d 91,
94 & n.4 (4th Cir. 1984). In the absence of specific
objections to the Report and Recommendation of the magistrate
judge, this court is not required to give any explanation for
adopting the recommendation. See Camby v. Davis, 718 F.2d
198, 199 (4th Cir. 1983). The court must “only satisfy
itself that there is no clear error on the face of the record
in order to accept the recommendation.” Diamond v.
Colonial Life & Acc. Ins. Co., 416 F.3d 310, 315
(4th Cir. 2005).
the DP Defendants, RHCT, and COR (collectively
“Objectors”) make numerous objections. The
Objectors object that the magistrate judge erred in
recommending: (1) granting a stay before determining whether
the court has subject matter jurisdiction over the
Plaintiffs' claims; (2) granting an open-ended stay; and
(3) summarily denying their motions without addressing the
merits or allowing the motions to remain pending. ...