Fernandez v. Franklin Resources, Inc. et al

Filing 52

ORDER by Judge Claudia Wilken denying 33 Motion for Summary Judgment and 34 Motion to Dismiss. Cases 16-cv-4265 CW and 17-cv-6409 CW are ordered consolidated. (dtmS, COURT STAFF) (Filed on 4/6/2018)

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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 5 6 NELLY F. FERNANDEZ, individually and on behalf of similarly situated individuals, Plaintiff, 7 Case No. 17-cv-06409-CW ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS AND FOR SUMMARY JUDGMENT v. 8 United States District Court Northern District of California 9 10 (Dkt. Nos. 33, 34) FRANKLIN RESOURCES, INC., et al., Defendants. 11 12 13 14 15 16 17 18 19 20 21 Plaintiff Nelly F. Fernandez brings this case pursuant to ERISA § 502(a)(2) against Defendants Franklin Resources, Inc. (FRI), the Franklin Templeton 401(k) Retirement Plan Investment Committee, the Franklin Templeton 401(k) Retirement Plan Administrative Committee, and individual members of the FRI’s Board and Committees. Defendants bring motions to dismiss and for summary judgment. Plaintiff opposes both motions. parties appeared for a hearing on April 3, 2018. The Having considered the papers and the arguments of counsel, the Court DENIES both motions. 22 23 BACKGROUND Unless otherwise noted, the factual background is taken from 24 the First Amended Complaint (FAC). 25 The Franklin Templeton 401(k) Retirement Plan (the Plan) is 26 a “defined contribution plan” under 29 U.S.C. § 1002(34) and an 27 “employee pension benefit plan” under 29 U.S.C. § 1002(2). 28 The Plan is sponsored by FRI and managed by the Administrative 2 Committee and the Investment Committee. 3 J. Vergara in Support of MTD (Vergara MTD Decl.), Ex. 1 (Plan 4 Document) at 42-44. 5 Plan’s administrator and the Investment Committee selects and 6 monitors investments offered by the Plan to participants. 7 see also FAC ¶¶ 6-9. 8 their fiduciary duties to the Plan by offering underperforming 9 United States District Court Northern District of California 1 mutual funds managed by FRI, offering a money market fund rather 10 than a stable value fund, and charging excessive administration 11 fees. 12 their own benefit and to the detriment of the Plan and its 13 participants. 14 Declaration of Catalina The Administrative Committee acts as the Id.; Plaintiff alleges that Defendants breached Plaintiff alleges that Defendants took these actions for Plaintiff, who resides in Florida, is a former employee of 15 FRI. 16 invested funds in her Plan account in at least four Proprietary 17 Mutual Funds: the Mutual Global Discovery Fund, the Income Fund, 18 the Templeton World Fund, and the Mutual European Fund. 19 She participated in the Plan from 2011 through 2016. She On November 2, 2017, Plaintiff filed this suit on behalf of 20 the Plan against Defendants, asserting four claims: (1) breach of 21 fiduciary duty, (2) prohibited transactions in violation of 29 22 U.S.C. § 1106(a), (3) prohibited transactions in violation of 29 23 U.S.C. § 1106(b), and (4) failure to monitor fiduciaries. 24 Plaintiff seeks to certify a class of all participants in the 25 Plan from July 28, 2010 to the date of judgment. 26 things, Plaintiff seeks restoration of all losses to the Plan. 27 28 Among other Over a year earlier, on July 28, 2016, Marlon Cryer brought suit on behalf of the Plan against FRI and the Investment 2 Committee, asserting claims for breach of fiduciary duties to the 2 Plan based on the same actions challenged in this case (offering 3 underperforming mutual funds managed by FRI, offering a money 4 market fund rather than a stable value fund, and charging 5 excessive administration fees). 6 Inc. et al., Case No. 16-cv-4265 (Cryer), Docket No. 1. 7 October 24, 2016, the Cryer defendants brought a motion for 8 summary judgment, contending that Cryer could not advance his 9 United States District Court Northern District of California 1 claims because he had released them in his severance agreement. Cryer v. Franklin Resources, On 10 Cryer, Docket No. 44 (Order Denying Motion for Summary 11 Adjudication and Motion to Dismiss). 12 motion, relying on Bowles v. Reade, 198 F.3d 752 (9th Cir. 1999), 13 and holding that, because Cryer could not “release the breach of 14 fiduciary duty claims made on behalf of the Plan, such claims are 15 not covered by the covenant not to sue.” 16 also denied the Cryer defendants’ motion to dismiss, finding that 17 Cryer had adequately alleged a breach of fiduciary duty claim. 18 Id. at 9. 19 amended complaint to add new claims for prohibited transactions 20 and failure to monitor and to add as new defendants the FRI Board 21 and individual members of the Board and Committees. 22 Docket No. 56. 23 not demonstrate diligence in seeking leave to amend after 24 allegedly discovering in a document production the facts giving 25 rise to his amendment. 26 later certified a class of all participants in the Plan from July 27 28, 2010 to the date of judgment. 28 The Court denied the Id. at 7. The Court On June 20, 2017, Cryer sought leave to file an Cryer, The Court denied Cryer’s motion because he did Cryer, Docket No. 66 at 3. The Court Cryer, Docket No. 67. Shortly after the present case was filed, on January 31, 3 1 2018, the Court found that it was related to Cryer. 2 25. 3 4 5 Docket No. DISCUSSION I. Motion for Summary Judgment Summary judgment is properly granted when no genuine and disputed issues of material fact remain, and when, viewing the 7 evidence most favorably to the non-moving party, the movant is 8 clearly entitled to prevail as a matter of law. 9 United States District Court Northern District of California 6 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Fed. R. Civ. P. 10 Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir. 11 1987). 12 The moving party bears the burden of showing that there is 13 no material factual dispute. 14 true the opposing party’s evidence, if supported by affidavits or 15 other evidentiary material. 16 815 F.2d at 1289. 17 in favor of the party against whom summary judgment is sought. 18 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 19 587 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952 20 F.2d 1551, 1558 (9th Cir. 1991). Therefore, the court must regard as Celotex, 477 U.S. at 324; Eisenberg, The court must draw all reasonable inferences 21 Material facts which would preclude entry of summary 22 judgment are those which, under applicable substantive law, may 23 affect the outcome of the case. 24 identify which facts are material. 25 Inc., 477 U.S. 242, 248 (1986). 26 The substantive law will Anderson v. Liberty Lobby, Where the moving party does not bear the burden of proof on 27 an issue at trial, the moving party may discharge its burden of 28 production by either of two methods: 4 1 The moving party may produce evidence negating an essential element of the nonmoving party’s case, or, after suitable discovery, the moving party may show that the nonmoving party does not have enough evidence of an essential element of its claim or defense to carry its ultimate burden of persuasion at trial. 2 3 4 Nissan Fire & Marine Ins. Co., Ltd., v. Fritz Cos., Inc., 210 5 F.3d 1099, 1106 (9th Cir. 2000). 6 If the moving party discharges its burden by showing an 7 absence of evidence to support an essential element of a claim or 8 defense, it is not required to produce evidence showing the United States District Court Northern District of California 9 absence of a material fact on such issues, or to support its 10 motion with evidence negating the non-moving party’s claim. Id.; 11 see also Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 885 (1990); 12 Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991). 13 If the moving party shows an absence of evidence to support the 14 non-moving party’s case, the burden then shifts to the non-moving 15 party to produce “specific evidence, through affidavits or 16 admissible discovery material, to show that the dispute exists.” 17 Bhan, 929 F.2d at 1409. 18 If the moving party discharges its burden by negating an 19 essential element of the non-moving party’s claim or defense, it 20 must produce affirmative evidence of such negation. Nissan, 210 21 F.3d at 1105. If the moving party produces such evidence, the 22 burden then shifts to the non-moving party to produce specific 23 evidence to show that a dispute of material fact exists. Id. 24 If the moving party does not meet its initial burden of 25 production by either method, the non-moving party is under no 26 obligation to offer any evidence in support of its opposition. 27 Id. This is true even though the non-moving party bears the 28 5 1 ultimate burden of persuasion at trial. 2 II. 3 Id. at 1107. Motion to Dismiss A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” 5 Civ. P. 8(a). 6 a claim to relief that is plausible on its face.” 7 Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. 8 Twombly, 550 U.S. 544, 570 (2007)). 9 United States District Court Northern District of California 4 12(b)(6) for failure to state a claim, dismissal is appropriate 10 only when the complaint does not give the defendant fair notice 11 of a legally cognizable claim and the grounds on which it rests. 12 Twombly, 550 U.S. at 555. 13 the plaintiff pleads factual content that allows the court to 14 draw the reasonable inference that the defendant is liable for 15 the misconduct alleged.” 16 Fed. R. The plaintiff must proffer “enough facts to state Ashcroft v. On a motion under Rule A claim is facially plausible “when Iqbal, 556 U.S. at 678. In considering whether the complaint is sufficient to state 17 a claim, the court will take all material allegations as true and 18 construe them in the light most favorable to the plaintiff. 19 Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 20 1061 (9th Cir. 2008). 21 of the complaint, materials incorporated into the complaint by 22 reference, and facts of which the court may take judicial notice. 23 Id. at 1061. 24 conclusions, including threadbare “recitals of the elements of a 25 cause of action, supported by mere conclusory statements.” 26 Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). The court’s review is limited to the face However, the court need not accept legal 27 28 6 DISCUSSION 1 2 I. Motion for Summary Judgment Defendants assert that Plaintiff’s suit is barred by a 3 covenant not to sue in her severance agreement. Declaration of 4 Catalina J. Vergara in Support of MSJ (Vergara MSJ Decl.), Ex. 1 5 (Severance Agreement).1 Plaintiff disagrees. 6 Plaintiff signed a severance agreement on December 17, 2015, 7 after her employment with FRI terminated. The severance 8 agreement contains a release, which states: United States District Court Northern District of California 9 10 11 12 13 (c) Claims Released. The Employee understands and agrees that the Employee is releasing to the fullest extent allowed by law all known and unknown, contingent or non-contingent, anticipated or unanticipated claims, promises, obligations, liabilities, causes of action, or similar rights of any type that the Employee may have had, or presently has, against any Released Party (the “Claims”). [ . . . ] 14 Id. at 3, § 2(c) (emphasis in original). 15 give non-limiting examples of released claims, including “all 16 common law, contract, tort . . . as well as Claims the Employee 17 might have under . . . the Employee Retirement Income Security 18 Act of 1974.” 19 20 21 22 23 24 25 The release goes on to Id. (emphasis added). The release is subject to a carve-out provision, which provides exceptions to the definition of claims released: (d) Rights Not Released. The Employee understands and agrees that this Release does not release any rights that the law does not permit the Employee to release. [ . . . ] The Employee further understands and agrees that the Employee is not releasing any right that relates to: [ . . . ] (iii) the Employee’s vested participation in any qualified retirement plan; [ . . . ] 26 1 27 28 Defendants contend that the severance agreement is governed by Florida law pursuant to the agreement’s choice of law provision. Severance Agreement at 9, § 5(c). Plaintiff does not dispute this point. 7 1 Id. at 4, § 2(d) (emphasis in original). 2 The release is supplemented by a covenant not to sue: 3 (e) Promise Not to Litigate Released Claims. Unless contrary to, or prohibited by, applicable, prevailing law, the Employee represents that the Employee will not bring any lawsuit, arbitration, or action in the future in which the Employee seeks to recover any damages from the Released Parties relating to any Claim other than (i) an action to enforce the Employee’s rights under this Confidential Agreement pursuant to Section 6, below, (ii) an action reserved to the Employee by application of law or regulation, or (iii) an action outlined in Section 2(d), above. 4 5 6 7 8 United States District Court Northern District of California 9 10 Id. at 4, § 2(e). In Defendants’ view, the release and covenant not to sue 11 broadly promises that the employee, Plaintiff, releases all 12 claims including ERISA claims and will not bring any lawsuit 13 relating to those claims. 14 release is subject to the carve-out and the carve-out covers this 15 lawsuit. 16 relates to: [ . . . ] (iii) the Employee’s vested participation 17 in any qualified retirement plan.” 18 suit seeks to vindicate rights that relate to her vested 19 participation in the Plan. 20 Plaintiff argues, however, that the The carve-out provides an exception for “any right that Plaintiff argues that her Regardless of whether the severance agreement applies to 21 Plaintiff’s claims, the Ninth Circuit’s holding in Bowles v. 22 Reade prevents its enforcement here. 23 Circuit held that a plan participant cannot settle, without the 24 plan’s consent, a § 502(a)(2) breach of fiduciary duty claim 25 seeking “a return to [the plan] and all participants of all 26 losses incurred and any profits gained from the alleged breach of 27 fiduciary duty.” 28 Plaintiff seeks to bring the same type of claim to restore value In Bowles, the Ninth 198 F.3d 752, 760 (9th Cir. 1999). 8 Because 1 to the Plan, she could not have released the claim (or agreed not 2 to bring a lawsuit asserting that claim) without the consent of 3 the Plan. 4 a substantially identical severance agreement drafted by FRI in 5 Cryer, Docket No. 83 (Order Denying FRI’s Motion for 6 Reconsideration) at 7. 7 and covenant not to sue cannot be enforced against Plaintiff’s 8 claims. United States District Court Northern District of California 9 The Court reached the same conclusion with respect to Thus, the severance agreement’s release Defendants attempt to distinguish Bowles v. Reade from the 10 present case in two main ways. 11 Bowles dealt with the enforceability of a release, not a covenant 12 not to sue. 13 respect to almost identical provisions, observing that “the 14 covenant not to sue in this case is explicitly a ‘Promise Not to 15 Litigate Released Claims,’” and because “Plaintiff cannot release 16 the breach of fiduciary duty claims made on behalf of the Plan, 17 such claims are not covered by the covenant not to sue.” 18 Order Denying Motion for Summary Adjudication and Motion to 19 Dismiss at 7. 20 between a release and a covenant not to sue because bringing suit 21 is the mechanism by which a party can vindicate a legal claim. 22 First, Defendants contend that The Court rejected this argument in Cryer with Cryer, Moreover, there is no meaningful difference Second, Defendants argue that Bowles involved a defined 23 benefit plan, not a defined contribution plan. 24 Bowles suggests that its holding is dependent on this fact. 25 Defendants argue that the Supreme Court’s holding in LaRue v. 26 DeWolff, Boberg & Assocs., Inc. provided that § 502(a)(2) claims 27 as applied to defined contribution plans are necessarily 28 individual and not on behalf of the plan. 9 But nothing in 552 U.S. 248 (2008). The Court disagrees. 2 “authorize[s] recovery for fiduciary breaches that impair the 3 value of plan assets in a participant’s individual account.” 4 at 256. 5 § 502(a)(2) claims necessarily had to be brought on behalf of the 6 plan, disavowing an interpretation of its holding in Russell that 7 § 502(a)(2) was meant to “protect the entire plan, rather than 8 the rights of an individual beneficiary.” 9 United States District Court Northern District of California 1 Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142 LaRue merely holds that § 502(a)(2) Id. The Supreme Court in LaRue rejected the argument that Id. at 254 (quoting 10 (1985). 11 contribution plans were gaining popularity over defined benefits 12 plans, and that for defined contribution plans, “fiduciary 13 misconduct need not threaten the solvency of the entire plan” to 14 give rise to a claim under § 502(a)(2). 15 LaRue’s holding that, in the defined contribution context, 16 § 502(a)(2) permits individual claims, does not mean that all 17 § 502(a)(2) claims must be individual. 18 bring a § 502(a)(2) claim on behalf of a plan, even if the plan 19 is a defined contribution plan. 20 In doing so, the Supreme Court noted that defined Id. at 255-56. But A plaintiff may still In sum, the severance agreement does not bar Plaintiff’s 21 claims in this lawsuit. 22 II. 23 Motion to Dismiss Defendants move to dismiss the FAC on a number of grounds: 24 (1) the first-to-file doctrine bars Plaintiff’s suit, and 25 (2) Plaintiff fails to state a claim on all four asserted causes 26 of action. The Court addresses each in turn. 27 A. 28 Defendants first contend that this suit should be dismissed First-to-file doctrine 10 in light of Cryer under the first-to-file doctrine. 2 to-file rule “is a generally recognized doctrine of federal 3 comity which permits a district court to decline jurisdiction 4 over an action when a complaint involving the same parties and 5 issues has already been filed in another district.” 6 Sys., Inc. v. Medtronic, Inc., 678 F.2d 93, 94–95 (9th Cir. 7 1982). 8 avoid duplicative litigation and thus should not be lightly 9 United States District Court Northern District of California 1 disregarded.” The first- Pacesetter The purpose of the rule “is to promote efficiency and to Inherent.com v. Martindale-Hubbell, 420 F. Supp. 10 2d 1093, 1097 (N.D. Cal. 2006) (citing Alltrade, Inc. v. Uniweld 11 Prod., Inc., 946 F.2d 622, 625 (9th Cir. 1991)). 12 file doctrine requires the court to consider three factors: 13 (1) chronology of the action, (2) similarity of the parties, and 14 (3) similarity of the issues. 15 accept or decline jurisdiction is reviewed for abuse of 16 discretion. 17 Id. The first-to- The Court’s decision to Id. Plaintiff argues that the first-to-file doctrine applies 18 only where a second case is filed in a different district, which 19 is not the case here. 20 the first-to-file rule where both cases are filed in the same 21 district, see Wallerstein v. Dole Fresh Vegetables, Inc., 967 F. 22 Supp. 2d 1289, 1294 (N.D. Cal. 2013), it is usually used to 23 transfer the second-filed case to the district where the first- 24 filed case is already pending or to stay the case in favor of a 25 ruling in the first-filed case. 26 Supp. 2d at 1097 (transferring case); Schwartz v. Frito-Lay N. 27 Am., No. C-12-02740 EDL, 2012 WL 8147135, at *3 (N.D. Cal. Sept. 28 12, 2012) (transferring case); Kohn Law Grp., Inc. v. Auto Parts While some district courts have invoked See, e.g., Inherent.com, 420 F. 11 1 Mfg. Mississippi, Inc., 787 F.3d 1237, 1241 (9th Cir. 2015) 2 (affirming stay of case). 3 The Court will not apply the first-to-file rule here. Where two duplicative suits are pending in the same district, the Ninth 5 Circuit has applied the claim-splitting doctrine rather than the 6 first-to-file rule. 7 487 F.3d 684, 689 (9th Cir. 2007) (abrogated on other grounds). 8 The court reviewed for abuse of discretion a district court’s 9 United States District Court Northern District of California 4 dismissal of a second suit filed after leave to amend was denied Adams v. California Dep’t of Health Servs., 10 in the first suit. 11 the second suit was “duplicative” by “borrow[ing] from the test 12 for claim preclusion” and analyzing “whether, assuming that the 13 first suit were already final, the second suit could be precluded 14 pursuant to claim preclusion.” 15 the causes of action and relief sought, as well as the parties or 16 privies to the action, are the same.” 17 finds two cases to be duplicative, “[a]fter weighing the equities 18 of the case, the district court may exercise its discretion to 19 dismiss a duplicative later-filed action, to stay that action 20 pending resolution of the previously filed action, to enjoin the 21 parties from proceeding with it, or to consolidate both actions.” 22 Id. at 688. 23 duplicative, the Ninth Circuit affirmed the district court’s 24 dismissal, noting that it was within the court’s broad discretion 25 to do so, given the equities of the case. 26 Id. at 687-88. The court considered whether Id. at 689. Id. The test is “whether If the district court Having concluded that the second suit was Id. at 692. Here, the parties involved in both cases are not entirely 27 identical. 28 one certified in Cryer: “All participants in the Franklin The putative class in this case is identical to the 12 1 Templeton 401(k) Retirement Plan from July 28, 2010 to the date 2 of judgment.” 3 Defendants’ side, FRI and the Investment Committee have been sued 4 in both cases, but this case adds the Administrative Committee 5 and individual members of FRI’s Board and Committees. 6 have not argued that these additional defendants are privies of 7 the original defendants. FAC ¶ 116; compare Cryer v. Franklin. On Defendants As for the causes of action and issues of the case, 9 United States District Court Northern District of California 8 Plaintiff’s breach of fiduciary duty claim is identical to the 10 one in Cryer and is supported by nearly the same factual 11 allegations. 12 transactions claims, however, were not asserted in Cryer. 13 addition, at least the prohibited transactions claim relies on 14 new theories and facts discovered after Cryer’s complaint was 15 filed, including a grandfathered recordkeeping arrangement 16 whereby FRI offered better terms to other retirement plans as 17 compared to the Plan. 18 Plaintiff’s failure to monitor and prohibited In sum, this suit is not duplicative of Cryer. In Considering 19 the equities2 and the interests of judicial economy, the Court 20 declines to dismiss this case and instead consolidates it with 21 Cryer. 22 B. 23 Defendants assert that Plaintiff’s complaint fails to state 24 Failure to state a claim a claim for each of the asserted causes of action. 25 2 26 27 28 Defendants assert that Plaintiff’s counsel filed this suit on Plaintiff’s behalf after Cryer’s motion for leave to amend was denied for lack of diligence. Because this occurred before the class was certified, Cryer’s lack of diligence cannot be used to prevent Plaintiff and the rest of the putative class from bringing the same claims in a separate suit. 13 1 1. First cause of action: breach of fiduciary duty The Court rejects Defendants’ arguments on Plaintiff’s 2 breach of fiduciary duty claim because they are largely 3 duplicative of the arguments the Court rejected in Cryer. The 4 thrust of Defendants’ argument is that Plaintiff does not provide 5 facts supporting her contentions that Defendants acted 6 imprudently or that Defendants’ decision-making process was 7 conflicted. Plaintiff has, however, provided facts supporting 8 her contentions. See, e.g., FAC ¶¶ 51-52, 56 (describing how United States District Court Northern District of California 9 proprietary funds underperformed compared to similar funds in the 10 market, employed unsuccessful managers, and received poor ratings 11 from independent agencies such as Morningstar). Defendants 12 contest Plaintiff’s allegations. As stated in Cryer, however, 13 “[w]hen considering a motion to dismiss, the Court must read the 14 allegations in the light most favorable to the non-moving party 15 . . . the Court may not resolve such factual questions at the 16 motion to dismiss stage.” Order Denying Motion for Summary 17 Adjudication and Motion to Dismiss at 9-10. 18 19 20 2. Second and third causes of action: prohibited transactions Defendants assert that Plaintiff’s prohibited transactions 21 claims are limited by ERISA’s statute of repose. 22 dismissed under Rule 12(b)(6) if it is clear from the face of the 23 complaint that the statute of limitations or repose has run. 24 Jablon v. Dean Witter & Co., 614 F.2d 677, 682 (9th Cir. 1980). 25 ERISA’s statute of repose provides, “No action may be commenced 26 . . . six years after (A) the date of the last action which 27 constituted a part of the breach or violation, or (B) in the case 28 of an omission the latest date on which the fiduciary could have 14 A claim may be 1 cured the breach or violation.” 2 § 1113(a). 3 the prohibited transaction at issue is providing proprietary 4 funds, which constitutes “furnishing of goods, services, or 5 facilities” in violation of ERISA § 406. 6 judicially-noticeable documents3 show that at least thirty-nine of 7 the funds at issue were first offered more than six years ago. 8 ERISA § 413(a), 29 U.S.C. Defendants contend that the complaint is clear that Defendants argue that Plaintiff responds that her prohibited transactions claims United States District Court Northern District of California 9 accrued each time a plaintiff received underpayment of benefits, 10 or, in the alternative, each time Defendants agreed annually to 11 adopt the same investments and fees. 12 Plaintiff: her prohibited transactions claims are not time-barred 13 merely because Defendants first offered some of the mutual funds 14 at issue outside of the limitations period. 15 Grumman Corp. Litig., a district court agreed with this view, 16 reasoning that the defendant had an ongoing duty to monitor the 17 services it offered and the defendant “reviewed and approved, on 18 a yearly basis, annual proposals that set forth the schedule of 19 services [the defendant] planned to provide [] during the 20 upcoming year.” 21 2015) (citing Tibble v. Edison Int’l, 135 S. Ct. 1823, 1828 22 (2015), which considered a similar issue in the context of a 23 failure to monitor claim). The Court agrees with In In re Northrop 2015 WL 10433713, at *26 (C.D. Cal. Nov. 24, 24 3 25 26 27 28 Defendants do not attempt to show that the documents at issue are in fact judicially noticeable. Lee v. City of Los Angeles, 250 F.3d 668, 688–89 (9th Cir. 2001) (generally, a court may not consider any materials not in the pleadings on a motion to dismiss, unless the documents’ authenticity is not contested and the plaintiff’s complaint necessarily relies on them, or the material is a matter of public record). 15 1 Defendants attempt to distinguish Northrop Grumman on the 2 basis that Plaintiff has not alleged in her complaint that 3 Defendants conducted a review of the services they intended to 4 provide for the upcoming year. 5 so allege in order to state a prohibited transactions claim. 6 is Defendants’ burden to show that it is clear from the face of 7 the complaint that the claim is time-barred, which they have not 8 done. United States District Court Northern District of California 9 3. But Plaintiff is not required to It Fourth cause of action: failure to monitor 10 Defendants contend that Plaintiff fails to provide 11 sufficient facts supporting her claim for failure to monitor. 12 appointing fiduciary has a duty to monitor its appointees. 13 29 U.S.C. § 1002(21)(A). 14 monitor under ERISA, the plaintiff must allege that the defendant 15 failed to review the performance of its appointees at reasonable 16 intervals in such a manner as may be reasonably expected to 17 ensure compliance with the terms of the plan and statutory 18 standards.” 19 SACV1501507JVSJCGX, 2016 WL 6803768, at *5 (C.D. Cal. Apr. 18, 20 2016) (internal quotation marks omitted). 21 Plaintiff does not allege facts supporting these contentions. 22 Plaintiff alleges that FRI, the Board, and its members failed to 23 monitor the committee members, their performance, and their 24 fiduciary process; failed to ensure that the committee considered 25 superior investment alternatives; and failed to remove committee 26 members who continued to offer imprudent proprietary funds, in 27 spite of the Plan’s heavy losses. 28 points out potential conflicts of interest of Board members. An See “To state a claim for failure to Carter v. San Pasqual Fiduciary Tr. Co., No. 16 Defendants argue that FAC ¶ 147. Plaintiff also Id. 1 ¶¶ 93-97. 2 not required to plead specific facts about the fiduciary’s 3 internal processes because such information is typically in the 4 exclusive possession of a defendant. 5 Inc., 588 F.3d 585, 598 (8th Cir. 2009) (“No matter how clever or 6 diligent, ERISA plaintiffs generally lack the inside information 7 necessary to make out their claims in detail unless and until 8 discovery commences.”). This is sufficient to state a claim. A plaintiff is Braden v. Wal-Mart Stores, United States District Court Northern District of California 9 CONCLUSION 10 The Court DENIES Defendants’ motion for summary judgment 11 (Docket No. 33) and DENIES Defendants’ motion to dismiss (Docket 12 No. 34). 13 Resources, Inc. et al., Case No. 16-cv-4265. 14 issue a revised schedule for both cases in a separate order. 15 The Court CONSOLIDATES this case with Cryer v. Franklin The Court will IT IS SO ORDERED. 16 17 Dated: April 6, 2018 CLAUDIA WILKEN United States District Judge 18 19 20 21 22 23 24 25 26 27 28 17

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