Brannen v. First Citizens Bankshares Inc. Employee Stock Ownership Plan with 401(k) Provisions et al, No. 6:2015cv00030 - Document 71 (S.D. Ga. 2016)
Court Description: ORDER granting in part and denying in part Defendants' motions to dismiss Counts IV and V of Plaintiff's Complaint: 39 Motion to Dismiss, 40 Motion to Dismiss, 41 Motion for Joinder in Motion to Dismiss; and terminating Plaintiff's 61 Motion for Hearing. Signed by Judge J. Randal Hall on 8/26/2016. (jah)
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Brannen v. First Citizens Bankshares Inc. Employee Stock Ownership Plan with 401(k) Provisions et al IN THE UNITED STATES SOUTHERN DISTRICT DISTRICT STATESBORO CARRIE BRANNEN, both COURT Doc. 71 FOR THE OF GEORGIA DIVISION * individually and on behalf of * the Plan (First Citizens * Bankshares Inc. Employee Stock Ownership Plan with 401(k) provisions) , * * * * 6:15-cv-30 * Plaintiff, * v. FIRST CITIZENS BANKSHARES INC. * EMPLOYEE STOCK OWNERSHIP PLAN * WITH 401(k) al., * * PROVISIONS, et * Defendants. * ORDER This case governed by the concerns Employee an employee-stock-ownership Retirement and Security Act et seq. ("ERISA") as codified at 29 U.S.C. § 1001, dismiss Counts of Plaintiff's Complaint are before the IV and V Defendants' plan motions to Court.1 Upon due consideration and with the benefit of oral argument (Doc. 39-41) 70) , the Court GRANTS Defendants' motions (Docs. IN PART and DENIES their motions IN PART. 1 Most Defendants filed a single motion to dismiss on September 21, 2015. (Doc. 39.) The remaining Defendants each filed "joinder" motions seeking dismissal on the same grounds as the principle motion. (Docs. 40, 41.) Dockets.Justia.com I. For assumes purposes the of truth BACKGROUND Defendants' of the motions following to dismiss, allegations the Court contained in Plaintiff's Complaint. Plaintiff Bank"), formerly thirty-five retiring by First (Compl. and rising 1 the Plan, is by the and a defined is a plans, the Plan known Stock sponsoring employer (Id. before Bank. (Id. in the First Plan plan SI this with governed 21) More and employee-stock-ownership plan invests ("Company Stock"), in in that (Id.) the this provides Like most shares case, of the its Bank. SI 23.) Defendant as as Ownership contribution primarily for employment, Defendant individual accounts for each plan participant. ESOP Inc., employee-stock-ownership formally the Plan is a 401(k) ("ESOP"), her an employee-pension-benefit sponsored ("the vice-president During Plan Employee Inc. Bankshares to Bank's The Inc. Bankshares, 25.) The 2.) Provisions, in S Citizens (Id. ) Bankshares particularly, plan as 2004. Plan") . ERISA Defendant eventually (Id. 1 matter. 401(k) known participated ("the Citizens for years, in Plaintiff plan worked a (Id. member SI 4.) Dana of the Potts administered Bank's Board of the Plan Directors and also ("the served Board"). Plaintiff is suing Defendant Potts in her capacity as Plan Administrator and as a board member. (Id.) In addition to Defendant Potts, thirteen other members or former members of 2 the Board are Defendants. (IcL_ SIS! 5-17.) The Bank's Board of Directors was responsible for appointing a trustee to manage the Plan's investments. appointed (Id. SI 24.) Investment In addition to the trustee, Committee shared managing the Plan's investments. responsibility (Id.)2 (Id. The Board selected Defendant Sterne, Agee & Leach, serve as Plan trustee. When Plaintiff distribution prove In quarter of (Id. half (Id. On distribution of relevant SIS! 26, its May the to last SI 26.) resulted approximately 26.) Inc. to she 25.) 2009, not That of 2008 statements take decision Plaintiff quarter Those did her would received and the ESOP first indicated that Company Stock had declined from $340 per share to Stock SI 2004, (Id. . SI the (Id. $167 per share. Company for 2009. the value of Plan. in early-to-mid statements SI SI 19.) retired from the costly. account (Id. for The Board oversees and monitors both the trustee and the investment committee. 24.) an her in claims during 2009, ESOP The drop in the value of Plaintiff's value 27, 42-42.) the (Id. issue in account preceding Plaintiff account. at ESOP six months. a lump-sum requested SI this 27.) losing Although motion, not Plaintiff alleges that the Bank never made the distribution and offered no 2 Plaintiff's investment 18.) an Complaint committee members indicates are In their brief and at the hearing, investment committee was that Defendants never twenty in this case. "John Doe" (Compl. SI Defendants represented that created. The existence investment committee has no effect on the present motion. of an justification for failing to comply with the Plan's terms. SIS! 28-34.) before According filing share. (Id. suit, to they that knew (Id. ) recent valuation worth available just over $29 per SI 44. ) investment alleges most Company Stock was Despite the decline Plan's the (Id. in in value, Company Defendants or should Further, she Defendants Stock. (Id. maintained have known alleges the the that the have SI retained the 45.) Plaintiff investment investment Plan's even was though imprudent. fiduciaries failed to conduct an investigation into whether the investment remained prudent and that such an investigation would have imprudence under then-prevailing circumstances. Plaintiff brings the Plan. violated In ERISA investments in investments concerning Plaintiff counts, by, among Company other Stock, failing ESOP Stock to as alleges things, failing Stock distribution. to were Defendants negative and Complaint whether under the information failing to pay identifies six which can be summarized as follows: • imprudent investigate prudent investment, Her that maintaining disclose an (Id.) her behalf and on behalf of Plaintiff Company Company her case on general, in circumstances, this revealed its Count I by Plaintiff individually against the Plan and the Bank for a declaratory judgment that Plaintiff's rights were violated when Plaintiff's claim' requesting her ESOP distribution was not properly and timely paid; • Count the II Plan rightful by Plaintiff and the ESOP Bank individually for the distribution against amount plus of her prejudgment interest; • Count III by Plaintiff individually against Dana Potts as Plan Administrator for failing to provide requested Plan documents; • Count IV by Plaintiff on behalf of the Plan for damages from the Board, the Investment Committee, and the Trustee for breach of their fiduciary duties of prudence, loyalty, and to monitor appointed fiduciaries; • Count V by Plaintiff on behalf of the Plan for equitable relief from the Board, the Investment Committee, and the Trustee for breach of their fiduciary duties of prudence, loyalty, and to monitor appointed fiduciaries; • Count VI for reasonable attorneys' fees and costs. (Compl. SIS! 55-77.) Though only Counts Plaintiff IV and V asserts are six claims presently at against issue. Defendants, Count IV pleads "breaches of the fiduciary duties of prudence and loyalty, separate breach (Compl. SI breaches. 71.) of the Count (Compl. filed their motions SI to duty V to seeks 74.) monitor appointed equitable relief On dismiss September Counts 21, fiduciaries." for 2016, IV and V. and a these same Defendants (Docs. 39-41.) Those motions are now ripe for adjudication. II. Under Federal Rule of LEGAL Civil STANDARD Procedure 8(a)(2), must contain "a short and plain statement of the a complaint claim showing that the pleader is entitled to relief" to give the defendant fair notice 'of both the claim and the supporting grounds. Atl. Corp. v. defendant's complaint right must to Twombly, Rule must 550 12(b)(6) include relief 550 above U.S. Rule 12(b)(6) allegations, than Rule motion the relief that 570. and of a failure to the of and action can (1957); see formulaic will not more raise on a facts its face." attacked by recitation do." Id. than accusation." a complaint Bd. (11th Kabir at a an at of the 555. The unadorned, the- Ashcroft 556 U.S. v. Iqbal, at 555). should not be dismissed for Cir. set of Conley v. v. *2 of Educ. accept as true all reasonable no relief." also Marshall Cty. all to and those is plausible (quoting Twombly, prove 4500050, 1174 plaintiff's allegations level," survive a state a claim "unless it appears beyond a doubt that him to 1171, (2009) same time, entitle WL a standard "demands 678 plaintiff 2011 a Although a complaint conclusions, cause 662, the To dismiss, speculative defendant-unlawfully-harmed-me At to (2007). motion need not be buttressed by detailed factual 8 pleading 556 U.S. 555 the plaintiff's pleading obligation "requires more labels elements at 544, enough ''factual "state a claim to Twombly, U.S. Bell inferences Gibson, Statebridge (N.D. v. 1993)). facts circumstances Ga. Co., this 27, Gas stage, the light most 41, 45-46 1:ll-cv-2747, 2011) Dist., the alleged in the complaint in would U.S. No. Sept. Marshall Cty. At 355 that (citing 992 F.2d Court must and construe favorable to the plaintiff. Cir. Hoffman-Pugh v. Ramsey, 312 F.3d 1222, Rule 12(b)(6) of limitations "if it is apparent from the grounds is appropriate dismissal on statute face of the complaint that the claim is time-barred.'" Perez v. Package 2014) Sys., Inc., (quoting La 840, 845 587 Grasta (11th Cir. v. Counts Board of violated IV and the appointed V Directors, separate Board Fed. Appx. First 603, Union 605 Sec, Fedex Ground (11th Inc., Cir. 358 F.3d 2004)). III. of the DISCUSSION Plaintiff's Investment fiduciary duties also violated fiduciaries. Count Committee, of their IV Complaint allege seeks the the and loyalty and prudence fiduciary that and duty damages seeks equitable relief for these alleged breaches. 74.) (11th 2002). "A that 1225 to while Trustee monitor Count (Id. V SISI 72, The Court separately addresses each claimed breach below. A. Duty of Prudence Defendants argue that the statute of limitations bars Plaintiff's duty-of-prudence claim and that Plaintiff failed to satisfy the Twombly-Iqbal pleading standard. At the hearing, the Court suggested that Plaintiff's duty- of-prudence claim could be viewed as two different claims or two different alleged breaches of the duty of prudence.3 alleged breach challenged Defendants' Company Stock during 2008-09. The first decision to buy and hold (See Compl. 1 45.) Defendants' brief refers to such a claim as a stock-drop claim because these claims often arise where knew or should have a plaintiff alleges that a fiduciary known that particular stock was or excessively risky for a plan's objectives. overvalued The second claim is that Defendants breached the duty of prudence by failing to investigate whether it was prudent to continue holding Company Stock. (See id.) Both parties rejected the Court's interpretation of Plaintiff's Complaint and argued that Plaintiff only brings one prudence claim. revealed that claim while claim. arguments believe breaches that of the Defendants Plaintiff This on But motion. Plaintiff's the duty believe believes difference this parties' of in briefing that it is claim a Court, Complaint prudence drives however, alleges and is arguments a stock-drop failure-to-investigate perspective The and two addresses the parties' continues to independent each alleged breach separately below. 3 Pleading in this fashion is similar to a plaintiff pleading one negligence count but alleging two breaches of the duty of care. 8 1. Decision to Hold First Citizens Bank Stock The Court begins with Plaintiff's allegation that Defendants breached the duty of prudence by continuing to hold Company Stock. Defendants argue that ERISA's statute of limitations bars this claim. The relevant statute of limitations provides as follows: action may be commenced under this No subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of— (1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of which an the omission the fiduciary latest could the breach or violation, date have on cured or (2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation; Except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation. 29 U.S.C. because § 1113. Defendants argue that § 1113(2) Plaintiff possessed "actual knowledge" alleged breach since "early-to-mid 2009." at 15.) the "Actual Plaintiff knowledge," "must have had as used specific breach of duty upon which he sues." 753, 755 (11th Cir. 1987). in bars Count IV of (Defs.' Defendants' Br., § 1113(2), knowledge Brock v. of Doc. means the Nellis, 39 that actual 809 F.2d According when, last to the Complaint, it was in upon receiving quarterly ESOP account quarter of 2008 and the first early-to-mid statements quarter of 2009, In response to the sudden decrease, lump sum distribution of to rollover to an (Id. 1 27.) the (Compl. SI Plaintiff "requested a her ESOP account," IRA. for Plaintiff learned of the 50% decline in Company Stock value. 26.) 2009 which she Defendants intended contend that Plaintiff had actual knowledge of the facts giving rise to the alleged breach Defendant, at this time. Conversely, Plaintiff by continuing to hold the Company Stock, violation of ERISA such that the statute of believes remained in limitations never began to run. all In relevant indistinguishable Supp. nom. 3d 599, from 602 respects, In re (S.D.N.Y. Citigroup 2015), In re Citigroup ERISA Litig., 2015), and 2461-cv, affTd 2016 sub WL nom. 2956958 this Cir. Erisa breach Litig., reconsideration 112 Muehlgay (2d alleged F. Supp. v. May 23, 104 F. denied 3d 156 Citigroup is Inc., sub (S.D.N.Y. 15- There, 2016) . No. the plaintiffs alleged that the defendants breached their fiduciary duties making imprudent investments in Citigroup. The defendants moved to dismiss the plaintiffs' 609. on by the grounds plaintiffs' that it possessed was "actual barred by knowledge" § 1113(2) of the the investment three years before filing the suit. court noted that the plaintiffs' 10 complaint Id. at complaint because the imprudence of The district alleged that Citigroup's "perilous clear . . . , based on, continuous decline downgrades, . . . ." that was among other things, plaintiffs' the condition in price Id. at per share 610. Citigroup stock's [and] ratings The district possessed abundantly actual agency court concluded knowledge of the imprudence of continued investment in Citigroup by December 2008 and ruled that § 1113(2) barred the plaintiffs' claims. Id. at 610-11. Here, the three-year face of Plaintiff's Complaint indicates that the limitations period began to run when Plaintiff learned of the precipitous drop in the value of Company Stock in early-to-mid 2009. (See Compl. limitations period ran in H 26-27.) early-to-mid Accordingly, 2012, well the before Plaintiff filed her Complaint. Plaintiff's this case 1829 counterargument is unconvincing. resembles (2015). In Tibbie Tibbie, fiduciary breached the monitor Supreme investments Court v. Edison the duty of and held that plaintiff prudence by remove "so Int'l, imprudent long as the regardless selected. U.S.C. Id. Notably, § 1113(1) (A), period "after of (A) when the however, which 135 alleged, Tibbie's for Ct. a 1823, "that a failing to properly ones." suit, imprudent provides S. Id. alleged breach continuing duty occurred within six years of timely" In her view, The of the the claim is investment holding concerns was 29 six-year-limitations the date of the last action which constituted 11 a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach therefore, or violation." 29 concerned with the U.S.C. § 1113. Tibbie was, question of when a breach occurs for purposes of § 1113(1) and not when a participant possesses "actual knowledge" of a Citigroup ERISA Litig., (finding this on breach analysis § 1113(2). 112 F. Supp. 3d 156, 159 reconsideration Court's under of that "[n]othing in why the plaintiffs' See In (S.D.N.Y. Tibbie claims re 2015) affects are barred under the three-year statute of limitations in § 1113(2)"). For these reasons, prudence claim Defendants' Court to the Court DISMISSES Plaintiff's duty-of- the extent that the alleged imprudent decision to hold Company Stock. considers Defendants' whether breach of Plaintiff the duty states of a viable prudence by breach is Next, the claim for failing to investigate whether the Plan should continue to hold investments in Company Stock. 2. Failure to Investigate Count breached IV the of Plaintiff's duty of Complaint prudence by alleges failing to prudence of continuing to hold Company Stock. that this alleged breach should be dismissed that Defendants investigate the Defendants argue because it is barred by the statute of limitations and fails to state a claim for relief. 12 As not had an initial matter, "actual knowledge" whether investment, see the statute-of-limitations bar a claim based on this alleged breach. investigate suit ERISA's within statute alleged 29 what Company U.S.C. § 1113 (l)'s of of of the Stock § does duty Plaintiff never Defendants continued 1113(2), six-year limitations breach actions and to of bar be Plaintiff limitations not a took a the filed her Because based Court to prudent window. claim prudence, does on this turns to whether Plaintiff satisfied the Twombly-Iqbal pleading standard. ERISA requires the care, skill, fiduciaries to discharge their duties prudence, "with and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with enterprise of such This to "Under trust monitor trust continuing duty trustee's duty to the outset." intervals (quoting A. Trustees § use in the conduct exists a trustee and separate has remove and a of 29 U.S.C. continuing imprudent apart an ones. from the exercise prudence in selecting investments at 135 conside[r] to Hess, G. 684 law, investments Tibbie, "systematic[ally] regular would a like character and with like aims." § 1104(a)(1)(B). duty matters S. at 1828. A trustee must all the investments of the trust at ensure Bogert, (2009)) Ct. that & G. (internal they are Bogert, appropriate." Id. Law and quotations of Trusts omitted). "[A] trustee's duties apply not only in making investments but also in monitoring and reviewing investments, which is to be done in 13 a manner that investments, is reasonable courses of action, (quoting Restatement Further, and appropriate (Third) "[m]anaging monitoring" see also U.L.A. (noting Unif. that Prudent § 2(d) Id. Comment b (2007)). and "a trustee has suitability of (quoting Unif. Prudent Inv'r 7B U.L.A. 21 (1995)) omitted); 21 Id. particular involved." for oversight of the the investments already made." Act § 2, Comment, the and strategies of Trusts § 90, embraces continuing responsibility to (internal quotation marks Inv'r "carries Act § 2, forward responsibility of the fiduciary investor to likely to bear importantly on the value Comment, the 7B traditional examine information of the security of an investment"). Accordingly, failure to at least in some circumstances, investigate constitute a breach of LaSalle Bank Nat. trustee who increased the imprudent"). of loss Moreover, the continued prudence of 446 F.3d 728, ignored risk prudence an the duty of prudence. Ass'n, simply the the of an 734 changed to the failure a fiduciary's investment See Armstrong v. (7th Cir. circumstances trust's to may 2006) ("[a] that have beneficiaries monitor or is investigate investment may breach the duty of prudence "even if adequate monitoring would have resulted in the same action (or inaction)." Int'l Union-Indus. 13-CV-4484, see also 2014 Bd. of Pension WL Fund v. 4627904, Trs. of United the at *4 Food Commercial Workers Bank of New York Mellon, (N.D. Operating 14 & 111. Eng'rs Sept. 16, Pension No. 2014); Trust v. JPMorgan Chase Bank, (S.D.N.Y.2013) careless ("One 'hold' imprudence, prudence. the N.A., 2013 U.S. decision another may That the resulting loss former of, nor condemn Dist LEXIS 43746, the may have have been been based to, based on on careful not is the same does latter at *27-28 relieve liability."). The question is whether a prudent man would investigate whether the Plan should continue to invest in Company Stock under the circumstances prevailing in 2008 and 2009. Plaintiff alleges that "the Plan's fiduciaries failed to conduct an appropriate investigation into whether Company Stock was a prudent investigation that investment "would investment by for have the the Plan" revealed Plan in to alleges that Defendants protect Plan participants Stock (Compl. "failed to from investment that reasonable Company circumstances was clearly imprudent." further a and these Plaintiff any action" losses. (Id. Plaintiff's Complaint is not particularly detailed, S[ never conducted Plan should continue take any action to 47.) Although it an into investing in Company Stock, protect the is investigation Defendants' 47.) that whether the and failed to Plan from losses. plausible that to but she does allege that the Plan invested in Company Stock before 2008, Defendants an fiduciary under ! 45.) take such (Id. IS! 45, failure to act resulted from a considered decision-making process following an investigation into the merits of investing in Company Stock, it is equally plausible that no investigation occurred and that the 15 Plan's buy-and-hold "care, skill, strategy prudence See § 1104(a)(1)(B). resulted and diligence" The Court, from the absence required of therefore, of the fiduciaries. finds that Plaintiff has stated a claim for breach of the fiduciary duty of prudence. See United Food, 2014 WL 4627904, at *4 ("the alleged fact that BNY Mellon adopted a 'hold' strategy and therefore did not monitor the Lehman Note is a sufficient factual allegation that stands on its own without further explanation (and, if untrue, is easy to refute at the appropriate stage)"). Briefly, the Court addresses the applicability Supreme Court's decision in Fifth Third Bancorp v. 134 S. Ct. Plaintiff 2459 fails (2014) to to this a claim state claim. for the Dudenhoeffer, Defendants relief of argue because she that did not "plausibly allege an alternative action that the defendant could have laws taken and a viewed as it." Id. at consistent fiduciary more likely to 2472. that in This the with the the same circumstances harm the quotation, securities fund than to stripped alternative-action of its requirement The Court concludes not. Court's applicability vigorously been every potential prudence claim. it does holding prudent suggests applies to The have have context, that would that would not help that to conclusion privately disputed. regarding The inside does held Court not companies, assumes information 16 turn on Fifth which that would Third's the parties Fifth Third's apply in those circumstances. Instead, the relevant distinction is between cases alleging imprudent investment decisions and those alleging a failure Armstrong, review to investigate and reach a considered decision. 446 F.3d at 733-34 standard where a (declining to apply a deferential trustee ignores changed circumstances and does not exercise a discretionary judgment). itself makes this clear. Cf. The opinion begins Fifth Third by describing the question before the Court as "whether, when an ESOP fiduciary's decision to buy court, the or hold the employer !s stock is challenged in fiduciary is entitled to a defense-friendly standard that the lower courts have called a Fifth Third, describing that the lawsuit 134 the S. Ct. district district ESOP 2463 court's court challenges at ^presumption of prudence.'" (emphasis order, "began from fiduciaries' the the added). Supreme premise investment When Court that noted where decisions, a the plan fiduciaries start with a presumption that their decision to remain invested in employer securities was reasonable." 2464 (emphasis added) (internal omitted). Finally, requirement, the Supreme Court held that it a claim for breach when quotations of inside information," id. party alleges investment introducing the at duty 2472, that a defendant decision based review of cases relying on on of the and Id. at citations alternative-action applies "[t]o state prudence on the basis of meaning that it applies when a should have inside reached a different information. The Court's Fifth Third indicates that district 17 courts apply the alternative-action requirement to claims alleging that parties knew or should have known that a stock was improperly valued or risky based on inside information.4 Court's knowledge, alternative-action breached the prudence of no court requirement duty of an by failing investment. Third's command to apply a "careful, of a complaint's that, at applied Fifth Third's to a claim alleging a fiduciary prudence remaining in has To the allegations," id. the motion-to-dismiss to investigate Consistent with the Fifth context-sensitive scrutiny at stage, 2570-71, the there no is Court finds alternative- action requirement in a case alleging that a Defendant breached the duty of prudence by failing to conduct an investigation into the prudence of continuing to hold an investment. For these dismiss reasons, Plaintiff's investigate basis. the Court DENIES duty-of-prudence Defendants' claim on the motions to failure-to- Plaintiff may proceed with this claim based 4 See Hill v. Hill Bros. Constr. Co., Inc., No. 3:14-cv-213, 2016 WL 1252983, at *4 (N.D. Miss. Mar. 28, 2016) noting that the Supreme Court applied Fifth Third's alternative-action requirement "to plaintiffs' allegations regarding [investment decisions based on] non public information available only to the fiduciaries because they were Fifth Third insiders, . . . ."), reconsideration denied, No. 3:14-cv213, 2016 WL 4132255 (N.D. Miss. Aug. 2, 2016); In re Lehman Bros. Sec. & ERISA Litig., 113 F. Supp. 3d 745, 751 (S.D.N.Y. 2015) (applying Fifth Third's alternative-action requirement to claims asserting that continued investment in company stock was imprudent based on inside information) , aff'd sub nom. Rinehart v. Lehman Bros. Holdings Inc., 817 F.3d 56 (2d Cir. 2016); In re Jpmorgan Chase & Co. Erisa Litig., No. 12 CIV. 04027 (GBD), 2016 WL 110521, at *4 (S.D.N.Y. Jan. 8, 2016) (applying Fifth Third's alternative-action reguirement where "plaintiffs allege fraud and artificial inflation"). 18 on her allegation prudence by that failing Defendants to breached investigate whether their the duty Plan of should continue to hold Company Stock. B. Duty to Monitor Appointed Fiduciaries In this claim, Plaintiff alleges that the Board (Compl. 11 its fiduciary duty to monitor appointed fiduciaries. 46, 70-71) . asserted claim. 19); The in parties Count (Defs.' IV Br., agree is that derivative In their briefs, that Plaintiff Because claim the on claim. the the to did Br., Doc. 52 at 690 (11th Defendants argue that if the Court state not claim duty-of-prudence 744 F.3d 685, it should also dismiss the Defendants made no failed Court of Inc., dismissed the duty-of-prudence claim, duty-to-monitor duty-to-monitor Doc. 39 at 17; PL's Resp. see Fuller v. SunTrust Banks, Cir. 2014). the breached a claim dismiss independent for failure Plaintiff's failure-to-investigate basis, to argument monitor. duty-of-prudence the Court DENIES Defendants' motion to dismiss Plaintiff's duty-to-monitor claim. C. Duty of Loyalty Plaintiff Defendants. also asserts 11 (Compl. 48, a duty-of-loyalty 70-71.) claim Plaintiff against alleges that "Defendants regularly communicated with the Plan's Participants, including investment alleges Plaintiff, in that yet Company failed to Stock." "Defendants disclose (Compl. allowed 19 the SI the 48.) Plan's imprudence She of further participants to follow their natural bias towards investment in the employer by not disclosing negative material their concerning investment added.)) According prevented Plan regarding their in Company to Plaintiff, Participants investments Federal Rule of Civil dismiss this claim, from in arguing that (Id. Defendants' (emphasis nondisclosure informed Plan. (Id.) 12(b)(6), decisions Pursuant Defendants Plaintiff of information making the Procedure Stock." stock moved failed to to to meet the participants may Twombly-Iqbal pleading standard Courts have concluded that ERISA plan state a cause of action for breach of fiduciary duty based on a failure to disclose information to plan participants. v. Am. 2004) 2d Gen. Life & Ace. Ins. (collecting cases); 1361, 1368 (N.D. Ga. Co., Hill v. 2004). 370 F.3d 1065, 1072 BellSouth Corp., Courts are, See Jones (11th Cir. 313 however, F. Supp. reluctant to require disclosure in cases based on inside information. In re 2d Enron Corp. 511, duty to law"). 1267 555 (S.D. disclose For (11th defendants Sec, Derivative & ERISA Litig., Tex. is instance, Cir. an 2003) area of their the that Home of and Depot, plaintiffs duty "[t]he developing in Lanfear v. 2012), violated (noting 284 Supp. fiduciary's controversial Inc., alleged loyalty F. Cf. by 679 F.3d that the "failing to disclose any information to the Plan participants regarding Home Depot's deceitful business practices and how these activities adversely affected Company stock as a prudent investment option 20 under the plan." Id. Just dismiss for failure granted the plaintiff's Circuit affirmed. In to Id. as state here, a motion the defendants claim. to The dismiss, moved district and the to court Eleventh at 1286. affirming the district court, the Eleventh Circuit held that plan fiduciaries are not under a duty to disclose material nonpublic information. Court reasoned, Id. at 1285-86. "would force if so to what extent, the price disclose believe effect of that on the to guess whether, and [fiduciaries] stock, information the the adverse nonpublic information will affect employer that To hold otherwise, and then would require to the plan participants information will have a them value of the investment if materially fund." Id. at to they adverse 1285. The Eleventh Circuit recognized multiple problems with such a rule. First, Second, it would turn the participants market, of release would "thus And finally, of likely blowing the Court nonpublic market fiduciaries any investment nonpublic become to would Plan give them an not attempts to distinguish plan on sense, Plaintiff is correct: 21 the participants." Id. selective disclosure over advantage in non-plan the stock Id. Lanfear because she alleging failure to disclose "nonpublic" information. narrow Id. to available participants market to which they are not entitled. Plaintiff the recognized that the to advisors. information immediately benefit information participants into her Complaint does is In a not allege that any of this information is "nonpublic"; instead, she only alleges that Defendants failed to disclose "the imprudence of investing information" motion, Company in concerning Plaintiff Stock" Company further and "negative Stock. argued At that a material hearing this should Defendants on have disclosed the "riskiness" of the investing in Company Stock. Plaintiff all out that failure-to-disclose claims. recently their denied [company] 3234, in fiduciary information a existence material case duties to the stock." by In fact, v. at *7 that providing members Wagner Lanfear does alleging Plan 2015 WL 4557686, in part, v. also points (N.D. Ga. foreclose summary judgment was defendants false about Stiefel not and the Labs., "breached incomplete true Inc., value No. of l:12-cv- June 18, 2015). At least the Wagner decision relied on a disputed fact as to the of special nonpublic information. BellSouth Corp., a circumstances (noting that trigger heightened suggests that 313 F. "special if a See Supp. requiring id. 2d 1361, circumstance" disclosure plaintiff at disclosure *16; 1369 will (N.D. be obligations). can then, demonstrate in contrast see of also Hill Ga. 2004) required Thus, to Wagner the existence of to Lanfear, a "special circumstances" plaintiff can maintain a claim for failure to disclose material nonpublic information. The Court, contours of however, Defendants' need not take a position on the precise disclosure 22 obligation. Plaintiff's Complaint is devoid of "negative material any specific factual allegations of what information" Defendants possessed but failed to disclose or what "special circumstances" required disclosure. By comparison, allegations allegations the plaintiffs concerning the in Wagner defendants' that the defendants provided detailed misconduct, including affirmatively misled plaintiffs regarding the value of the stock and management's plans for the company. Id. at *7. Additionally, these events allegedly occurred in connection with "special circumstances," namely the defendant company's ultimately successful merger, which trigger a duty to disclose confidential information.5 *16; see Hill, at 313 F. Supp. 2d at 1369. Plaintiff's and conclusions, pleading obligation "requires more than labels and a formulaic recitation of the elements of a cause of action will not do." factual Id. can allegations of what Twombly, 550 U.S. Defendants at 555. failed to what special circumstances warranted disclosure, Absent disclose and Plaintiff fails to state a cause of action based on failure to disclose negative material information regarding the prudence of investing in Company Stock. 5 To be more precise, disclosure of additional the Wagner facts about decision appears the company's to require impending merger only because the defendants had actively misled plan participants concerning the potential for a significant change in the company such as taking the company public or merging. In other words, the Wagner result may have been different had defendants remained silent; it was their provision of misleading information which required corrective disclosure. 23 For these reasons, the Court GRANTS Defendants' motion to dismiss on Plaintiff's duty-of-loyalty claim. D. Equitable Claims Defendants Complaint, which 1132(a)(3) a moved to seeks dismiss Count equitable V relief of under for breach of fiduciary duties, Plaintiff's 29 U.S.C. for failure to § state claim. In Varity Supreme Court individuals upon Seafood Corp., 7, of 516 Congress fiduciary 'catchall' Court's U.S. No. 1088 that an § 1132(a)(3)." (1996) the claims [29 This holding v. King while had no & Prince In Katz v. Comprehensive Plan Of Grp. Ins., 197 (11th Cir. 1999), remedy cannot Katz, 1132(a)(1)(B) here was Ga. the Eleventh Circuit affirmed for a under Varity, claim alternatively 197 F.3d at 1088 for plead "a plaintiff benefits and proceed Plaintiff and equitable alternatively 24 under under (emphasis added). on the grounds that it concerned alternative pleading between a claim for § § (S.D. Plaintiff attempts to distinguish Katz under by U.S.C. plaintiffs 2006 WL 2367130, "the at *8 adequate § 1132(a)(1)(B) under Rosario the district court's conclusion that, with 512 authorized provision. finding 2:04-cv-036, 489, duties remedy under ERISA." 2006) . F.3d 1084, breach the Howe, that ERISA's other available Mar. v. held for 1132(a)(3)], premised Corp. relief pleaded under a § benefits 1132(a)(3) fiduciary-duty claim under § 1132(a)(2) equitable relief. The import clear This of and is the § 1132(a)(3) a distinction without Varity and Katz is that § claim a for difference. 1132(a) (3) only provides equitable relief where other remedial sections of ERISA are inadequate. Plaintiff's relief she brief Complaint seeks opposing questioned in at the the motion related to Complaint is not specify Moreover, hearing, fiduciary duty claims from case. Defendants' equitable relief the this does does not specify response and, counsel when discussed distribution claim, asserted in Count that equitable Plaintiff's Plaintiff's Plaintiff's what Plaintiff IV. seeks What this is not clear unspecified equitable relief for the same alleged misconduct that underlies her § 1132(a)(2) claims for breach of fiduciary duties. Plaintiff's allegations of misconduct are sufficient to claim are, under "then § 1132(a)(2), Plaintiffs and are of claim under [§ 1132(a)(3)]." these misconduct reasons, the Court precluded allegations For the through a from above of they these same fiduciary duty 2006 WL 2367130, GRANTS state a that asserting breach Rosario, Court held If Defendants' at *10. motion to dismiss Count V of Plaintiff's Complaint. IV. As PART stated above, Defendants' the motions CONCLUSION Court to GRANTS dismiss 25 IN PART Counts AND IV DENIES and V IN of Plaintiff's Complaint. (Docs. 39-41.) Because the Court heard argument on this motion on August 12, 2016 (Doc. 70), the Court DIRECTS the Clerk to TERMINATE Plaintiff's motion for a hearing. (Doc. 61.) ORDER ENTERED August, at Augusta, Georgia, this r>,(^ day 2016. J. RANDAL HALL UNITED/ STATES DISTRICT JUDGE SOUTHERN DISTRICT OF GEORGIA 26 of
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