Moore v. Virginia Community Bankshares, Inc. et al, No. 3:2019cv00045 - Document 44 (W.D. Va. 2020)
Court Description: MEMORANDUM OPINION. Signed by Senior Judge Glen E. Conrad on 6/26/20. (jcj)
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Moore v. Virginia Community Bankshares, Inc. et al Doc. 44 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 1 of 18 Pageid#: 1083 cu - s oFF1cEu. sxolsm cœ rr AT ROANOKQ,VA . FILED Jtld 2 C2222 IN THE U NITED STATES D ISTRICT COURT FOR THE W ESTERN DISTRICT OF VIRGINIA CHARLOTTESVILLE D IV ISION JULK . UDLEY LERK BK . D P . CL JAN ICE A .M OORE,etal., Plaintiffs, CivilA ction N o.3:19CV 00045 M EM O RA NDU M O PIN IO N By:H on.G len E.Conrad SeriiorUnited StatesDistrictJudge VG G IN IA COY U NITY BAN KSH ARES,IN C.,eta1., Defendants. PlaintiffJanice A .M oore tsled atwo-countputative classaction com plainton A ugust 12, . 2019,allegingviolationsoftheEmployeeRletirementIncomeSecurityAct,29U.S.C.jj1001#1s seq,CQERISA''IbyDefendantsVirginiaCommunityBankshares,lnc.(theSsl-loldingCompany''); VirginiaCommunity Bank (<çVCB''),awholly-owned subsidiary ofthe Holding Company;A. Pierce Stone;Ronald S.Spicer;John A .Hodge;and H .B.Sedwick,111. This m atter isbefore the courton D efendants'm otion to dism issM oore'scom plaintunderFederalRule ofCivilProcedure 12(b)(6)and Defendants'motion to supplementthe record. Thecomplex mattersaddressed therein havebeen expertly briefed and argued by a1lpartiesand are ripe forreview .Forthereasons stated,thecourtwilldeny the m otion to dism issand deny the m otion to supplem enttherecord. Backeround M oore isaform erV CB em ployeeand fonnerparticipantin an Employee Stock Ownership Plan- aretirem entplan- sponsored by theH olding Com pany forthe benefk ofemployees ofthe HoldingCompanyandofVCB (theCIESOP''orthe$Tlan'').ThebulkofthePlan'sassetswerein Holding Company stock with theremainderinvested in cash. Compl.!!(1,43,& 44..M oore allegesthattheBoardsofDirectorsoftheHoldingCompanyandofVCB (whichincludedSpicer) adm inistered the Plan,thatthe sam e people who controlled the ESOP also controlled V CB,and Dockets.Justia.com Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 2 of 18 Pageid#: 1084 thatVCB haddiscretiontomakestockbonuscontributionstotheESOP.1d.!!41-45.Atlçall relevanttimes,''Stone,Hodge,andSedwickweretrusteesoftheESOP.Id.!!24-27.ThePlan hassinceterminated,effectiveDecember31,2016.J#a!(123. The 2007 Valuation This story begins in late-2006 and early 2007. M oore alleges thatthe ESOP trustees retainedaninvestmentbank,HoweBarnesHoefer& Arnett Inc.(ççl-loweBarnes'l,toperform a valuationofHolding Company stock aspfDecember31,2006. Compl.!60,Ex.1.Todo so, HoweBanwsconsideredinformattonprovidedbythetrustees,andGGreliedon''theçsaccuracyand completeness''of that data. Ex. 1 at2-3. Howe Barnes subm itted a M arch 19,2007 letterthat valued HoldingCompany stock at$55pershare.Ld-a M oore asserts thatHowe Barnes reached its $55 per share valuation due to fraudulent omissionsbytheESOP trustees,Stone,Spicer,and others.Ld-a!!57-.68.Shecontendsthatthe H olding Company and V CB were facipg seriousproblem s atthetim e ofthe valuation- including defaultsoranticipated defaultson.one orm orelarge loansthatw erehighly unlikely to be repaid- thatwouldnegativelyimpactthevalueofHoldingCompanystock.Id.!64. M oore fortifies this assertion w ith specitic allegations. In 2010, the Virginia State Corporation Commission (the Sscorporation Commission'')and the FederalReserve Bank of ltichmond (the <TederalReserve'') began investigating VCB'S and the Holding Company's operations. This resulted in a Compliance Agreem entdated June 29,2011,which according to M oore tErevealed long-standing patterns ofoperationaland com pliance problem s and regulatory violations''including,am ong other things,insuffcient oversight in credit risk m anagem ent and lending,aswellasEEproblemsrelated to loan grading.'' Id.!65;seealso ECF No.30-8. For example,the agreem entrequired thatV CB and theH olding Com pany com ply with certain agency 2 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 3 of 18 Pageid#: 1085 guidanceand policy sttem ents--dated l985,2001,2006,2009,and 2010- which related to credit riskmanagementamongotherthings.ECFNo.30-8!!I4(d),549,9(b),& 13(c).M ooreposits thatthe issues addressed by the investigation and subsequent agreem entdidtnot arise overnight andthattheyexistedin2006.Compl.!65. Based on information and belief,M ooreallegesthatthe trustees,Stone,and Spicerfailed todisclosetheseissuestoHoweBarnes.Ld.. a!67;MoorepointstothedisparitybetweentheHowe BamesvaluationasofDecember31,2006:$55pershare,andthepriceofHoldingCompany stock soldonDecember29,2006:$44.00pershare.Ld=.!61. Shealsonotessubsequentdrop-offsinsharevalue. See,e.g.,id.!! 59,92,109,131. AccordingtoM oore,thisindicatej-thatHowe Barnesdid nothave'al1thefactsnecessary to valuethe H olding Com pany shares. TheLoans Next,M ooreallegesthatDefendantscaused the ESOP to repurchaseHolding Company stock atthatallegedly inflated value,established by the 2007 valuation,forthe purposeofm aking cash distributionsto Stoneand Spicer. Ld. us!! 90-93 & 136. Indeed,Moore alleges,based on informationandbelieflthatDefendantsobtainedthe2007valuation forthepurposeofentering thesetransactions,Id.!68.DefendantsleveragedtheESOP'SassetstolnanceStoneandSpicer's cash-outsthrough allegedly non-exem ptloansissued in 2007 and2008 between VCB asthe lender >ndtheESOPastheborrower,loanswhichStoneandSpicerhelpedtoGçsetup.''J#.!!8,85-113. Thereby,Defendants foisted the burden ofthese loans upon Plan participantsbecause,according to M oore,thesumspaid on the loansshould havebeen used forthebenetitofallplan participants. M ooreD iscovers the Transactions M ooreallegesthatshe becam esuspiciousabouttheESOP transactionsin late2014 orearly 2015. V CB co-founder and form er Board m em ber Goodm an Duke,who w as Gçvisibly upset,'' 3 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 4 of 18 Pageid#: 1086 Ktbrieflyshowed''M ooreacopyoftheHoweBamesvaluationatthattime.JZ !97.0nFebnmry 26,2017,M oore w rote a letter to V CB'S president and CEO com plaining about the Plan's m anagem ent. H e responded,attaching a copy ofthe valuation,in April2017. ECF N o.30-10. ' j According to M oore,Defendants had engaged in a coverup to preventher and other Plan participants from learning aboutthevaluation and the 2007 and 2008 loans. Forexample,she statesthatthe2007valuation letterandloanswerenotdisclosedformanyyears.Compl.!!6768,94. Further,she allegesthattransactionsin 2008 w ere partofan effortto concealthe details ofthe 2007 loan,and thatDefendantsdisclosed ttinaccurate inform ation''on certain disclosures- Fonn5500filings- totheDepartmentofLaborandtheInternalRevenueService.1(J.!!11,114125.AstotheFonn 5500filings,M ooreallegesthatDefendantsfailedto disclosea(dscheduleE (ESOP informationl''from 2006-2009 and information relétedto thePlan'sliabilities,i.e.the loans,in line 1.b ofSchedule Iforeach Form 5500 from 2007-2016. 1d.;ECF No.30-2 at10,17, 22,27,34,41,48,55,63,71,80,88,& 96. M oore also allegesthatV CB intim idated em ployeesw ho raised concernsaboutthe ESOP. Compl.!!94-95. Forexample,in2010,aVCB loanofficerwasfredroughlytwoweeksafter asking to review theESOP'Sgoverning docum ents.Upon leaving,he allegedly state' d thatçtthisis w hathappenswhen you ask aboutthe ESOP.'' In addition,M oore statesthatdefendants (iinitiated questionable perform ance charges against her'' soon after she asked about the ESOP. 1d. D efendants also allegedly resisted M oore's efforts to obtain infonnation in concert with an investigation by the D epartm entofLabor. 1d. ProceduralH istorv Defendants'initialmotionto dismissraisedthreeprinciplearguments:(1)thatM oore's complaintisuntimelyunderEIUSA'Sstatutorytimelimits;(2)thatMoorefailstoplausiblyallege 4 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 5 of 18 Pageid#: 1087 thatDefendantspossessed butfailedtodisclosemateriallyadverseinformationin2006;and (3) thatdefendantsVCB and Ronald Spicerare notproperdefendants,orthatthe com plaintdoesnot suY ciently allege that they are Gduciaries under ER ISA . On January 29, 2020,the parties appeared before the courton the m otion to dism iss. Thereafter,thecourtenteredan orderwhich,inpart,tookthemotionunderadvisementand permittedthepartiestojointlysubmitdocumentsthatthey agreedwereintegrated intoM oore's complaintorsubjecttojudicialnotice,wererelevanttothemotion,andwereauthentic.ECFNo. 27.Theorderalsoinvited supplementalbrieqng.Thepartiessubmittedajointdeclarationand accom panying docum ents contemplated by the court'sorder. A tthe sam e tim e,D efendantsfiled am otion arguing thatthe courtshould consideradditionaldocum ents.M ooreresponded thatthese docum ents were not explicitly relied on in her complaint. Defendants' supplem ental briefing offered additionalargum ents fordism issal,to w hich M oore hasresponded. Standard ofR eview To besure,FederalRule ofCivilProcedure 12(b)(6)is an ççimportantmechanism for weedingoutmeritlessclaims.''FifthThirdBancop v.Dudenhoeffer,573 U.S.409,425(2014) (analyzingERISA claimsand citing AshcroA v.Iqbal,556 U.S.662,677-80 (2009)and Bell AtlanticCom .v.Twomblv,550U.S.544,554.-63 (2007:. To surviveamotion todismiss,a plaintiff must ççstate a clahu to reliefthatis plausible on itsface,''m eaning thata plaintiffm ust çtpleadllfactualcontentthatallowsthecourttodraw thereasonableinference''thatadefendantis liable. Iqbal,556U.S.at678(internalquotationmarksomitted). YetE<gwqhenconsidering the sufficiency ofacomplaint'sallegationsunderaRule12(b)(6)motion,courtsmustconstruethe complaintliberallyso astodosubstantialjustice-''Bd.ofTrustees.SheetMetalW orkers'Nat'l PensionFundv.Four-c-Aireslnc.,929F.3d 135,152(4thCir.2019)(quotationmarksomitted). 5 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 6 of 18 Pageid#: 1088 ln so doing, courts m ust EEassum e as tnle all its well-pleaded facts and draw al1 reasonable inferencesinfavoroftheplaintiff''Id.at145(quotingNanniv.AberdeenM arketplace.lnc.,878 F.3d447,452(4thCir.2017:. FederalRuleofCivilProcedure9(b)requiresthat,<<gijnalleying fraud...,apartymust statewith particularity the circumstancesconstituting fraud ....'' However,ççlmlalice,intent, knowledge,and otherconditions ofa person'sm ind m ay be alleged generally-'' Id. ln the ordinary course, a court m ay only rely on the allegations contained w hhin a' complaintwhenreviewingaRule 12(b)(6)motion. Courtsmayneverthelessconsiderextrinsic documentswithoutconvertingamotiontodismissintoamotionforsummaryjudgmentwherethe docum entsare integralto a com plaintand there isno dispute as to theirauthenticity. See Goines v.Valley Cmty.Servs.Bd.,822 F.3d 159,166-69 (4th Cir.2016). Like factsalleged in a com plaint,facts derived from extrinsic docum ents m ustbe construed in the lightm ostfavorable totheplaintiff.SeeZakv.ChelseaTherapeuticsInt'l.Ltd.,780F.3d597,607-08(4thCir.2015).1 D iscussion ERISA providesparticipantsin an ERlsA-governed retirem entplan w ith a cause ofaction to recover losses caused by the m isdeeds ofERISA fduciaries. Tw o sections ofthe stam te are mostrelevanttothiscase:thesectionoutliningGduciaryduties,29U.S.C.j1104,andthesection prohibitingcertaintransactions,id.j1106.Underj1104(a),fiduciariesareheldtotheprudent m an standard ofcare,w hich has itsrootsin trustlaw . See Tibble v.Edison Int'l,135 S.Ct.1823, 1828(2015).Subjecttonumerousexceptions,j1106preventspartiesininterestandfiduciaries 1 The courtdenies Defendanl 'motion to supplementthe record. Sim ply stated,Defendants have not demonstratedthatthesedocuments- atmostobliquely referenced wereintegralto M oore'scomplaint. SeeAm . ChiropracticAss'nv.TriconHealthcare.Inc..367F.3d212,234(4thCir.2004);Philliosv.LCIInt'l.lnc..190F.3d 609,618-(4thCir.1999)(consideringdocumentonmotiontodismissKbecauseitwasintegraltoandexplicitlyrelied oninthecomglaintandbecausetheplaintiffs(didlnotchallengeitsauthenticityn).Inanycase,thecourtbelieves thatconsideratlonofthesedocum entswouldnothavealtered itsconclusionsonthepresentm otiontodism iss. 6 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 7 of 18 Pageid#: 1089 from engagingin certaintransactionsorRdealginglwiththeassetsofaplanintheirowninterest oxfortheirownaccount.''29U.S.C.jj1106(a)-(b). 1. A llezationsR eeardine the 2007 Valuation D efendants m aintain that M oore fails to plead the facts surrounding the M arch 2007 valuation with the requisite specitk ity,and thus,thatthe courtshould Eldismiss the fraudulent valuationclaim wfthprejudice.''M em.17-19;Supp.M em.at27-29.Thecourtdisagrees. To satisfy Rule 909,aplaintiffmustplead Ecthetime,place,and contentsofthe false representations,as w ellasthe identity of the person m aking the m isrepresentation and whathe obtained thereby.''Harrison v.WestinehouseSavannah RiverCo.,176F.3d 776,784 (4th Cir. 1999)(internalquotation marksomitted). Nevertheless,courts ç'should hesitate to dismissa complaintunderRule9(b)ifthecourtissatisfied(1)thatthedefendanthasbeen madeawareof theparticularcircumstancesforwhich (itqwillhaveto prepare a defenseattrial,and (2)that plaintiffhas substantialprediscovery evidence ofthose facts-'' Id.;accord U nited States ex rel. Bunkv.Gov'tLoaisticsN.V.,842F.3d261,275(4thCir.2016). The courtisconvinced thatM oore's allegationsasto the2007 valuation suffice. V iew ing M oore'sallegationsastrue,the courtfinds itreasonableto inferthatthe Com pliance A greem ent addressed long-standingproblem sresulting from the investigation bythe Com oration Com m ission and the FederalReserve. Indeed,the agreem ent itself references an exam ination begun by the regulators on M ay 3,2010. ECF N o.30-8 at6. The agreem entalso required thatVCB and the H olding Com pany comply w ith agency policy statem entsissued in 2001 and 2006,and m entioned reducing the leveloffçproblem assets.'' Id.at3,4,& 8. These provisionsm ake itreasonable to inferthatVCB and theH olding Com pany had qotbeen in compliance w ith those years-old policy statem ents. Stated otherwise,itisreasonable to inferthatthe Defendants would nothave agreed Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 8 of 18 Pageid#: 1090 w ith governm ent regulators to rem edy problem s that they did not have. See Fed.Hous.Fin. ,902F.Supp.2d476,486-88(S.D.N.Y.2012)(denyingmotion A zencv v.JpM oraanChase& Co. - to dism iss fraud claim w here,in part,plaintiffs alleged çtthe results of private and govem m ent investigations,which haldjconcluded that,duringtherelevantperiod,severalofthemortgage originators...disregarded their own underwriting guidelines on a widespread and systematic basis'').M ooreallegesthatspecificindividualsfailedtodisclosetheseallegedproblemstoHowe Barnesin the course ofthe2007 valuation. Howe Barnes,m oreover,çErelied on''the dataprovided bytheDefendantstoperform the2007valuation.Compl.!I !64-. 68,Ex.1.In sum,thespecific facts subm itted by M oore allow the courtto determ ine the who,what,w hen,where,and how of the alleged fraud. See H anison,176 F.3d 791. D efendantshavenotshown thatM oore'sallegationsasto the2007valuation are otherwise deficient.Shehasallegedscientergenerally,aspermittedunderRule9(b).Accordingly,thecourt believes thatM oore has sufficiently alleged thatthe Defendants obtained the 2007 valuation by fraudulently om itting the m atters addressed in the Compliance A greem ent from the inform ation provided toHoweBames. See,e.:..Gov'tLogisticsN.V.,842 F.3dat276 (reversing grantof motion to dismiss where pleadings ççsum ciently outlineld) the dealings''at issue,and thus çEsatisflied)themandateofRule9(b)'');M ccauleyv.HomeLoanInv.Banlc.F.S.B.,710F.3d551, 1 559(4thCir.2013)(rulingthatRule9(b)wassatisfiedwherethecourtcoulddeterminethat::41) thetimeoftheallegedfraudwaslatesummerorfall,2006...;(2)theappraisalwasundertaken atMccauley'shome,towhichOceanBanksentanappraiser;(3)thefalserepresentationconsisted oftherepresentationfrom OceanBankthatMccauley'shomewasworth$51,000ormore;(4)the identityoftheperson makingthemisrepresentation wasOcean Bank;and (5)asaresultofthe misrepresentation,Mccauleyagreedtothe$51,000loan''). 8 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 9 of 18 Pageid#: 1091 Further,thiscaseisdistinguishable from D efendants'strongestauthority,V iqeantv.M eek, - 953 F.3d 1022 (8th Cir.2020). ln thatcase,the plaintifffailed to explain how an allegedly fraudulentschem e couldhave affected thevalueofthe stock in w hich herplan had invested.Thus, the issue on appeal was whether because a com pany's fortunes fellsharply in 2017,the court should haveinferred thattherewere unexam ined problemswiththecompany in 2015 and 2016, and tlle United States CourtofAppeals forthe Eighth Circuitafflnued the dism issalofherclaim . Ld-aat102* 28. In contrast,M oorepointstotheHolding Company share valuesboth beforeand. after the valuation as indicating thatH ow e Barnes did nothave the facts to m ake an accurate assessm ent. There is also no indication thatthe record in M eek included anything like the 2011 Com plianceA greem entin thiscase. H. The Need to Disclosethe Loans In theirsupplem entalm em orandum ,Defendants argue thatthe 2007 and 2008 loansw ere legal. Thus,the D efendants assertthat under ERISA 'S disclosure requirem ents,there w as no affirm ative duty to infonu plan participantsaboutthem . ECF N o.40 at3-6. Theproblem w ith thisargum entisthatEstheduty to inform entailsnotonly a negative duty nottom isinform,butalso an afsrmativedutyto inform whenthetrusteeknowsthatsilencemight beharmful.''GriRasv.E.I.DupontdeNemours& Co..237F.3d371,380(4thCir.2001)(internal quotationmarksomitted).$((A)nERISA fiduciarythatknowsorshouldknow thatabeneticiary laborsunderamaterialmisunderstanding ofplan benefitsthatwillinureto (thebeneficiary'sl detrim ent cannot rem ain silent--especially when that m isunderstanding w as fostered by the fiduciaiy's ow n m aterialrepresentations or om issions.'' Id.at381. M oore suffciently explains how itisplausible thatthe 2007 valuation w as fraudulent,asthe courthas concluded above,that the loansincorporated aspects ofthatvaluation,and thatthe loans violated ERISA and/ordid not 9 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 10 of 18 Pageid#: 1092 comportwithDefendants'fiduciaryduties.See,e.e..29C.F.R.j2550.408b-34c)42)CWtthetime thataloan ismade...thepriceofsecuritiesto beacquiredwith the loanproceedsshould notbe such thatplan assetsmightbedrained off.'');29 U.S.C.j 1108(e)(1)(permitting atransaction between aplanandapartyininteresttsif(itzisforadequateconsideration'');seealsoPizzellav. Vinoskey,409F.Supp.3d473,511-13(W .D.Va.2019)(describingcontoursoftheaffirmative defensethatatransaction involvedççadequateconsideration''). M oore has also sufficiently alleged thatthe loans w ere purposefully notdisclosed to her, and thatD efendantsknew or should have know n thatthose loans m ightresultin harm to herand otherPlanparticipants.See,e.g.,Compl.!67,108,129.Asaresult,thecourtbelievesthatMoore hasstated enough factssuch thatitisplausiblethatD efendants had a duty to in 'form heraboutthe 2007 and 2008 loans. See G riags,237 F.3d at380-81;Spiresv.Schools,271 F.Supp.3d 795, 801O .S.C.2017)CsplaintiffsallegethePlanCommitteemembersfailedtotakeactioninresponse to improperinsidertransaitionsandotherspecificactsofmanagementmalfeasance,ofwhichthe Plan Com m itteehad actualknow ledge''andthat(<thosetransactionsw ereundisclosed orconcealed from Planparticipants.'')(internalcitationsomitted);Hensleyv.P.H.GlatfelterCo.,No.1:04-CV200,2005 WL 3158033,at*4 (W .D. N .C.Nov.28,2005) (defendantscould notSiwithholdl) informition''showing<sthataspecificsubstantialriskloomedinthebackgrdund'). 111. Tim elinessofM oore's Claim Defendants have also m oved to dism iss M oore's claim s as untim ely, w hich is an affirmativedefense.SeeFed.R.Civ.P.8(c)(1).Havingreviewedtherecordandapplicablelaw, the coul' t concludes that M oore's claim s cannot be dism issed as untim ely at this stage of the proceedings. EEplaintiffsare notordinarily required to plead allegationsrelevantto potentialaffrm ative 10 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 11 of 18 Pageid#: 1093 defenses....''Four-c-Aireslnc.,929F.3dat152(reversinggrantofmotionto dismissERISA claim).GlW qherefactssufficienttoruleonanaffirmativedefense'' includingççthedefensethat theplaintiffsclaim istime-barred''- sçareallegedinthecomplaint,(a!defensemaybereachedby amotiontodismissfiledunderRule12(b)(6).''Goodmanv.Praxair.lnc.,494F.3d458,464(4th Cir.2007)(enbanc).ççrfhisprincipleonlyapplies,however,ifal1factsnecessarytotheaffirmative defensetclearlyappearr)on thefaceofthecomplaint.'''Praxair.Inc-,494F.3dat464 (quoting RichmondaFredericksburg& PotomacR.R.v.Forst,4F.3d244,250(4thCir.1993)(emphasisin originall)(reversing grantofmotion to dismisson statute oflimitationsgrounds). To do so, movantsmustshow thattherecordtsforecloselsj''aplaintiff'srelianceonanyEspotentialrejoinder'' totheafsrmativedefenseraised,includinganargumentthatthestatutehadnotyetrun.1d.at466. Asisrelevantto thiscase,j 1113 ofERISA setsforth three altemativeperiodswithin which aplaintiffm ustfilea claim ,and each period hasdifferenttriggering events.z H ere,thecourt focuseson thethird.çtrf' hethird period,w hich applies:in thecaseoffraud orconcealm ent,'begins whentheplaintiffdiscoverstheallegedbreach.''Sulvma,140S.Ct.at774(quoting29U.S.C.j 1113).Underwhatthecourtwillrefertoastheêtfraud orconcealm entexception,''suitmustbe filed w ithin six yearsofçGthe date ofdiscovery''ofa claim . Id.at774,776. Fundam entally,theparties disagree on w hattriggersthe fraud or concealm entexception: M oore arguesthatthe fraud orconcealmentexception appliesin casesoffraud m .concealment; D efendants contend thatitrequires a showing ofGGfraudulentconcealm ent.'' Authority is divided Thefirstperiodbeginswhentheallegedbreachoccurs.IntelCorn.Inv.Policy Comm .v.Sulvm ax140 S.Ct. 762,774(2020).Underj1113(1),suitmustbefiledwithinsixyearsofççthedateofthelastactionwhichconstituted a pal4ofthebreachorviolation''or,inc%esofbreachbyomission,ççthelatestdateonwhichthetlduciarycouldhave curedthebreachorviolation.''1d.'fhesecondstatutoryperiodtçacceleratesthetslingdeadliney''andbeglnswhenthe plaintif gainsç%actualknowledqe''ofthebreach.Id.Under91113(2),suitmustbefiledwithintlzreeyearsofQhe earliestdateonwhichtheplaintlffhadactualknowledgeofthebreachorviolation.''Id. 11 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 12 of 18 Pageid#: 1094 on this question,3 and the United States CourtofAppeals forthe Fourth Circuithas notdecided which sideofthissplittojoin.However,inBrowninav.Ticer'sEyeBenefitsConsultina,the Fourth Circuit concluded that ERISA 'S fraud or concealm ent provision ttencom passes at a minimum the tfraudulentconcealmentdoctrine.''' 313F.App'x 656,663& n.4 (4th Cir.2009) (emphasisinoriginal). The courtneed notresolvethis question to decidethepresentmotlon to dismiss.TotheextentthatM ooreneeded to plead anythingtonegatetheaffirmativedefensethat herclaim isuntim ely,4 herpleadingssufticeundereithertheory. The parties agree thatfraudulent concealm entisthe m ore stringentofthese options,and sothecourtwillapplythattest.CCETJOtollalimiGtionsperiodbasedonfraudulentconcealment, Ga plaintiff mustdemonstrate:(1) the party pleading the statute of limitations fraudulently concealed factsthatarethebasisoftheplaintiffsclaim,and(2)theplaintifffailedtodiscover thosefactswithinthestatutoryperiod,despite(3)theexerciseofduediligence.''' Edmonsonv. EazleNat'lBank,922F.3d535,548(4thCir.2019)(quoting SupermarketofM arlintom lnc.v. M eadow GoldDairies.Inc.,71F.3d 119,122(4thCir.1995)). To begin, the court believes that M oore satisfies the first elem ent of the fraudulent concealm enttest.To do so ççaplaintiffm ustprovide evidenceofaffrm ative actsofconcealm ent'' such asGGsom e trick orcontrivance intended to exclude suspicion and preventinquiry''com m itted Eçbythedefendants.''Edmonson,922F.3dat553(internalquotationmarksomitted).Inthiscase, M oore alleges intim idation and retaliation againstem ployeesw ho investigated the ESOP.M oore 3 Compare.e.a..Fulzhum v.EmbarcCorn.,785F.3d395,415(10thCir.2015)(enbanc)with,e.R..Larsonv. Northrop Corn..,21F. 3d1164,1172(D.C.Cir.1994). 4 DuetothelengthypassageoftimehereandMoore'saffirmativeallejationsregardingherdiscoveryofthe breaches,the courttreatsthismatterçsasthe unusualcasewherea claim lsfiledclearb beyond theapjlicable limitationsperiodandtheglaintiffseekstoforestallitsdismissalbyallegingthefactsofdiscovery.''PrMalr.Inc.. 494 F.3d at466 (emphaslsin original);Edmonson,922 F.3d at552-52 (assessing whethercomplaintalleged fraudulentconcealmenttollingonreview ofamotiontodismiss). 12 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 13 of 18 Pageid#: 1095 states that V CB fired a loan officer in 2010 soon after he asked to see the Plan's governing docum ents. In gathering histhings to leave,he told his co-w orkers,çs this iswhathappens when youaskabouttheESOP.''SeeCompl.!95.Similarly,M oorecontendsthatDefendantsdçinitiated questionable performance charges againsther''in 2017 after she began asking questions. J#a M oore also asserts that Stone ççobfuscated herinquiry''by claim ing thathe had lostm oney like otherPlanparticipants,notthathehadcashedouthissharesatahighprice.Id.!96. Othercourts have concluded thatsim ilar actstriggerthe fraud or concealm entexception. SeeChaabanv.Criscito,468F.App'x156,160(3dCir.2012)(defendanttGinstructed''employees oftheplanadministratorçsthattheywerenotpermikedtospeaktoanyoneotherthanhim selfabout theP1ans'');In reUnisysCorp.RetireeM ed.BenetitCSERISA''Litig.,242F.3d497,505(3dCir. 2001),asamended(M ar.20,2001)(concludingthat%sdissuadlingl''anemployeeGsfrom consulting counsel''aboutherrightscouldbeaffirmativeconcealment);McGuirev.M etro.LifeIns.Co..899 F.Supp.2d 645,l661 (E.D.Mich.2012) (sdDefendant ()provided shifting and misleading inform ation that further hindered the Plan's discovery of its dividend policy change- nearly rendering thePlan'sinvestigationsfutile.''). So too here,the courtconcludesthatMoorehas suffiçiently alleged affirm ativeactsby the Defendantscarried outto avoid inquiry into theESOP.5 N ext,M oore satisfesthe second elem entofthe testbecausethe courtcannotconcludethat Moorediscoveredtheallegedbreachesmorethan sixyearsbeforeGlinghercomplaint. ççg-llhe date ofdiscovery,''is established by ttçnot only those facts the plaintiff actually knew ,butalso those facts a reasonably diligentplaintiff would have lcnown.''' Sulym a,140 S.Ct.at 774,776 (quptinjMerck & Co.v.Reynolds,559U.S.633,648(2010:.First,thecourtcannotconclude Becausethecourtdeemstheseallegationssufficientastothiselement,thecourtneednotdeterm inewhether otherallegedacts,such asthefilingofForm 5500s,m ighthavealsobeen ao rm ativeconcealm ent. 13 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 14 of 18 Pageid#: 1096 thatM oore actually discovered Defendants'alleged breachesbefore August2013.A spled,M oore didnotknow abouttheallegedbreachesinthiscaseuntil2017. Compl.!!71,97,& 100.The courtm usttreatthese allegations astrue. N orcanthecourtconcludeatthisstagethatM oorew ason constructivenotice ofherclaim s six yearsbeforefiling hercomplaint. Defendantsinsistthat,ifonly M oorehad been reasonably diligent,she w ould haveknown thatwhen the Holding Com pany entered ççcode 2P on line 8a''of itsForm 5500sshe needed to consultthe relevantIRS instructionsforthose form s. According to the Defendants,had she done so,she would have understood thatthe Plan had Gtacquireldq employee securities w ith borrow ed m oney or other debt-financing techniques,''--even though Line 1.b of each Fonu 5500 did not disclose any ET otalplan liabilities.'' Under this argum ent, D efendantscontend thatthe courtcan presently conclude thatM oore w as on constructive notice ofherclaimsasamatteroflaw.ECFNo.40 (citingECF No.30-4);ECF No.30-2. Thecourt disagrees. A dopting thatargum entatthis stage w ould place too m uch credence on the D efendant's docum ents and w ould require drawing factual inferences regarding Defendants' accounting practices and the nature ofthe loansagainstM oore.6 See Supp'lM em . at12-14;Supp'lOpp.at 31-33.Thecourtcannotdoso.SeeZak,780F.3dat607-08(districtcourtshouldnothaveheld thatdefendant'ssecuritiesflingsprovedtheabsenceofcertaintransactions);seealsoGoines,822 F.3dat166-68(regardingaEçdocument()preparedbyorforthedefendant,''courtsmustconsider thatthe docum entççm ay retlectthe defendant'sversion ofcontested eventsorcontain self-serving, exculpatory statements''). Atleastatthisstage,thecourtisconvinced thatitcannotholdasa Statedothem ise,whilethecourtneednotpresently holdthattheForm 5500sreflectevidenceofgaudulent concealment,supra n.5,itcannotconclude thatthe filings foreclose application ofthe gaudulentconcealment exception. 14 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 15 of 18 Pageid#: 1097 m atter of 1aw that D efendants' Form 5500 tslings put M oore on notice of her claim s. See Edmonson,922F.3dat554-57(reversingorderthatpublicGlingsshouldhavealertedtheplaintiff to herclaim and contrasting authority w hich <dinvolved plaintiffsthatw ere sophisticated business entities,asopposedtoconsumers'). Finally,in the court'sview,M oore'spleadings suftice underthe third elem entof the test because assessing whetherM oore w as sufsciently diligentis a fact-bound determ ination thatthe courtcannotrenderatthis stage.; See Edm onson, 922F.3dat554 (reversi nggrantofmotionto dismiss and stating thatçElglenerally,whether a plaintiff exercised due diligence''tmderthe fraudulent concealment tolling doctrine Gtis a jury issue not amenable to resolution on the pleadings....'');Nat'lElec.Ben.Fundv.ArlinetonParkRacecourseeLLC,No.8:11-CV-0090, 2011W L 2712742,at*4(17.M d.July 8,2011)(concludingthatwhethertheplaintiffçEoughtto have m ade aprom pter inquiry''w as :ça fact-intensive inquiry thatthe courtcannotresolve atthis stage').M ooreallegesatleastsomediligenceinseekinginfonnationfrom theDefendants,Duke, andtheD epartm entofLabor. Thecourtcannotpresently conclude thatM oore did notdö enough. Sim ply stated,the facts on the record do not<çforeclose''M oore's reliance on the fraud or concealmentexceptionasaitrejoinder''toDefendants'argumentthatherclaimsareuntimely.See Praxair.Inc.,494 F.3d at466. Accordingly,the courtw illdeny the m otion to dism iss M oore's claimsunderSection 1113. See id.(record on a motion to dismiss did notestablish dateof plaintiffstsdiscovery''ofhisbreachofcontractclaim);seealsoHealevv.Abadie,143F.Supp. 3d397,401-04(E.D.Va.2015)(denyingmotiontodismissbecauseitwasnotclearfrom theface The bulk ofDefendants'cited authority isdistinguishable on theproceduralposmrein which those cases weredecided:summaryjudgment,wherepartieshavetheburdento marshalspecific,admissibleevidenceafter discovery. SeeEdmonson.922 F.3d at557 (concluding thatsummaryjudgmentauthority wasEçinapposite''in determiningwhetherplaintiffwasoninquirynoticeofclaim onamotiontodismiss);Fed.R.Civ.P.56(c),(e). 15 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 16 of 18 Pageid#: 1098 ofthe com plaint <sthatA badie did not concealher actions under ERISA,which is the relevant inquiryonaRule12(b)(6)M otion implicatinganaffirmativedefense'l.s IV. Alleeations Regardin: VCB and Spicer N ext,D efendants m ove for partialdism issalon the basis thatM oore fails to adequately pleadthateitherVCB orSpicerareERJSA fiduciaries.Heretoo,thecourtdisagrees, ln relevantpart,ER ISA provides thataperson isa fiduciary w ith regards to aplan Eçto the extent(i)heexercisesanydiscretionaryauthorityordiscretionarycontrolrespectingmanagement'' ofthat plan çtor exercises any authority or control respecting m anagem ent or disposition of its assets,(ii)herendersinvestmentadvicefora fee orothercompensation,directorindirect,'' regarding assetsoftheplan,ççorhasanyauthority orresponsibilityto doso,or(iii)hehasany discretionary authority ordiscretionary responsibility in theadm inistration''oftheplan.29 U .S.C. j1002(21)(A).Thedetsnitionalsoçsincludesanypersondesignatedundersection1105(c)(1)(B)'' ofERISA ,which allows Eçnam ed fiduciariesto designate persons otherthan nam ed Gduciaries to carryoutGduciaryresponsibilities(otherthantrusteeresponsibilities)undertheplan.'' The Fourth Circuithas described this statutory definition as Gçfunctional.'' See M oon v. BWX Techs.plnc.,577F.App'x224,229-30(4thCir.2014).CourtsGçmustexaminetheconduct atissuewhendeterminingwhetheranindividualisanERISA fiduciary.''1d.(internalquotation marksomittedl). YetERISA doesnotRcharacterizea Gduciary asonewho exercisesentirely discretionary authority or control. Rather, one is a tiduciary to the extent he exercises any discretionary authority or control-'' Firestone Tire & Rubber Co.v.Bnlch,489 U .S. 101, 113 (1989)(emphasisinoriginal). ln sum,çEan individualorentitycanstillbefound liableasade ' HavingconcludedDefendantshavenotcarriedtheirburdentoshow thatM ooreisprecluded9om relyingon thefraudorconcealmentexception,whichofferedM oorethemosttim einwhichto 5lehercom plaint,thecourtneed notconsiderwhetherherclaimsaretimelyunderSections111341)and1113(2). 16 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 17 of 18 Pageid#: 1099 facto fiduciary if itlacks form alpower to controlor m anage a plan yetexercises inform ally the requisite discretionary control over the plan m anagem ent and adm inistration.'' M oon, 577 F. App'x at229-30(internalquotationmarksomitted);Searlsv.SandiaCorp.,50F.Supp.3d737, 747(E.D.Va.2014).CourtsalsohaveanEGobligationtoliberallyconstnleGduciarystat'usunder ERISA.''Dawson-M urdockv.Nat'lCounselincGrn..lnc.,931F.3d269,278(4thCir;2019). Here,M oore alleges severalnon-conclusory facts about Spicer's and V CB'S rolès w ith respectto thePlan. Forexample,M ooreallegesthatV CB was Sscontrolled by the sam epeoplewho controlledtheESOP,''andthatSpicerhelped tçsetup''the loansatissue.Compl.!!7-11.M oore alsodescribesSpicer'sseniorjobtitles,includingasadirector,withinVCB andtheHoldingCompany. 1d.!!25,88;ECF No.30-11(during Spicer'stenureasa director,there wereonly two to four individualswho served inthatcapacity). M eanwhile,theESOP çswasadministered by theBoard of DirectorsoftheHolding Company and theBoard ofDirectorsofVCB.'' Compl.!41. In addition, ECVCB had discretion to m ake stock bonus contributions to supplem ent the m oney purchase contribution.'' JZ !! 44-45. Further,VCB'S presidentand CEO wrote M oore a letter on VCB letterheadexplaining why therewasRnothing inappropriate''aboutthe2007 loan,referredto theESOP asRour''plan,and noted thatçtthecom pany couldredeem theshares''asoneway to pay itsparticipants. Ld=.!!71-72& ECFNo.30-10. Draw ing all reasonable inferences in M oore's favor, the court believes that these allegations m ake it plausible that Spicer and V CB exercised som e Ssdiscretionary authority or control''over the Plan,w hether form ally or inform ally. Bruch,489 U .S..at 113;M oon,577 F. App'x at229-30. As a result,the courtfinds itplausible thatthey w ere Gduciaries ofthe ESOP withrespecttothebreachesallegedbyM oore.See,e.g.,Dawson-M urdock,931F.3dat280Cgllhe Suprem e Courtand ourCourthave both recognized thatconveying inform ation abodtplan benefitsto abeneficiary in orderto assistplan-related decisionscan constimtefiduciary activity.''l;seealso29 17 Case 3:19-cv-00045-GEC Document 44 Filed 06/26/20 Page 18 of 18 Pageid#: 1100 C.F.R.j2509.75-8D-W CigMlembersoftheboardofdirectors(whojexercisediscretionaryauthority ordiscretionary controlrespectingmanagementofsuchplan g)are...fduciarieswith respecttothe x ' plan.'')(internalquotation marksomitted). Accordingly,thecourtwillnotdismissVCB and Spicer from thiscase atthisstage. Conclusion For the reasons stated, the courtw ill deny the m otion to dism iss and the m otion to supplem entthe record. The Clerk isdirected to send copiesofthism em orandum opinion and the accom panying orderto allcounselofrecord. DATED:This C $ dayofJune,2020. Se orUnited StatesD istrictJudge 18
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