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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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.
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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).
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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
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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
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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
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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
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Catalina J. Vergara in Support of MSJ (Vergara MSJ Decl.), Ex. 1
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(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
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10
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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
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