Dezelan v. Voya Retirement Insurance and Annuity Company

Filing 41

ORDER granting 17 Motion to Dismiss without prejudice. Amended Complaint due 8/5/2017. Signed by Judge Victor A. Bolden on 7/6/2017.(Ghosh, S.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
DARLENE DEZELAN, individually, on
behalf of the Cedars-Sinai Medical Center
403(b) Retirement Plan, and on behalf of all
similarly situated Plans,
Plaintiff,

No. 3:16-cv-1251

v.
VOYA RETIREMENT INSURANCE AND
ANNUITY COMPANY,
Defendant.

RULING ON DEFENDANT’S MOTION TO DISMISS
Ms. Darlene Dezelan (“Ms. Dezelan” or “Plaintiff”), brings this putative class action against
Voya Retirement Insurance and Annuity Company (“Voya” or “Defendant”), concerning retirement
funds that Voya managed on Ms. Dezelan’s behalf. She brings claims under the Employee
Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001 et seq., on behalf of the Cedars-Sinai
Medical Center 403(b) Retirement Plan, in which she was a participant, as well as all other ERISAcovered employee pension benefit plans whose assets were invested in similar funds managed by
Voya. Before the Court is Voya’s motion to dismiss. For the reasons that follow, Voya’s Motion is
GRANTED. Ms. Dezelan’s Complaint is dismissed without prejudice to refiling.
I.

Factual Allegations
Voya, a legal reserve insurance company authorized under the insurance laws of New York,

is based principally in Windsor, Connecticut. Compl. ¶ 8. Voya offers and sells Group Annuity
Contracts to retirement plans, including the Cedars-Sinai Medical Center 403(b) Retirement Plan (the
“Plan”). Id. at ¶ 9. Ms. Dezelan, a resident of Los Angeles, California, invests retirement assets
under Voya’s Group Annuity Contract (“Contract”) with the Cedars-Sinai Plan. Id. at ¶ 7.
Ms. Dezelan alleges that Voya “offers and sells” stable value funds. Compl. ¶ 2. Stable
value funds are “one of the most popular investment strategies for pension plans,” because “unlike
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traditional fixed income or bond funds, stable-value funds are structured … so that the principal and
income payments are steady instead of fluctuating.” Thomas P. Lemke & Gerald T. Lins, ERISA for
Money Managers and Advisors § 2:143 (2016 Ed.) (“Lemke & Lins”) (noting that the “protection of
principal and interest, even in volatile or troubled markets, is a key attraction of stable-value
funds.”); Austin v. Union Bond & Trust Co., No. 3:14-CV-00706-ST, 2014 WL 7359058, at *3 (D.
Or. Dec. 23, 2014) (“In contrast [to traditional bond funds], an SVF is designed to minimize the
impact of market fluctuations.”). A key feature of the stable value fund an investor is that she can
withdraw from the fund at any time and receive the book value of her investment, even if its market
value would be lower. Id.
The book value of an investment in a stable value fund is determined by the initial investment
as well as “contractually specified … increases in value.” Austin, 2014 WL 7359058, at *3. A stable
value fund contract sets forth a certain rate, usually called a “crediting rate,” at which interest is
applied to investments in the fund. Lemke & Lins § 2:143. This rate may be lower than the actual
rate of return that the fund receives on the assets, so that the fund can “smooth[] portfolio gains and
losses over time.” Id.
A. Ms. Dezelan’s Contract
Ms. Dezelan’s Plan invested in a Voya product called “Separate Account 896” (the “Separate
Account”), an “individual separate account that invests in broad sectors,” using a “strategy … to
outperform the Barclays Capital U.S. Aggregate Bond Index by 50 basis points on a rolling three
year basis.” 1 Contract, p. 19. Under the Contract, the Plan’s participants can convert their

1

When it moved to dismiss, Voya attached the Stabilizer Group Annuity Contract (“Contract”) between Voya, as
successor in interest to ING National Trust, and the Cedars-Sinai Plan, effective July 11, 2007 and renewed in 2014.
See Contract, Hill Decl. Ex. 1, ECF No. 17-2, at p. 1. For the purposes of this motion, all non-conclusory factual
allegations are accepted as true, and all inferences are drawn in favor of the plaintiff, as the nonmovant. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). The Court also considers the Contract and other documents attached to the motion
to dismiss, because the Complaint “‘relies heavily upon [their] terms and effect,’ which renders the document[s]
‘integral’ to the [C]omplaint.” Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) (quoting Int’l
Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995)).

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accumulated contributions and interest into annuities. Id. at §§ 5.01; id. at § 1.05 (allowing for “(a)
Participant-initiated withdrawals; (b) Participant-directed transfers of their account balances between
Investment Options; (c) Participant loans; or (d) Annuity purchases”).
Under the Contract, the Plan deposits funds to Voya, and Voya invests these funds consistent
with certain agreed-upon “investment objectives.” Id. at §§ 2.01, 2.02; 2.11. When the assets in the
Separate Account accumulate interest, Voya “credits” a certain portion of that interest to the Interest
Accumulation Fund at the “Crediting Rate.” Id. at § 2.07. The Contract guarantees a “minimum …
Crediting Rate, net of any applicable expense charges assessed, of 3.0%.” Id. at § 2.08. Between
April 1, 2014 and June 30, 2014, Voya applied a Crediting Rate of 3% to the Separate ACcount. Id.
at p. 33. Under the Contract, Voya also charged investors a fee of 0.75% of the Interest
Accumulation Fund. Id. at p. 24.
Under the Contract, “benefit withdrawals,” id. § 2.16, including annuity purchases, may not
“exceed the balance in the Interest Accumulation Fund.” Id. at § 2.21. Similarly, “Employer-Event
Withdrawals,” which are withdrawals or transfers “resulting from Employer-level event[s] not in the
ordinary course of business,” including “spin-offs,” “sales,” “mergers,” or “layoffs,” id. at § 1.14, are
paid from “[t]he Separate Account, to the extent of available funds.” Id. at § 2.26; id. at § 1.14
(“Employer-Event Withdrawals … are withdrawals from the Interest Accumulation Fund”).
If it discontinues its contract with Voya, the Plan can only receive the amount of money in
the Interest Accumulation Fund. Contract, p. 25 (“Over the Book Value Settlement Phase, we
will pay you the balance of the Interest Accumulation Fund.”). The Contract states that, at the time
of discontinuance, Voya “will retain any amounts remaining under the Separate Account Balance,”
or the “fair market value of the Separate Account,” following payment of the Interest Accumulation
Fund. Id. at §§ 1.22; 3.06.
In the Contract, Voya “acknowledge[s] that: “if the Plan is subject to [ERISA, Voya is]
acting as a fiduciary, as defined in section 3(38) of ERISA, solely with respect to the management of
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Plan funds held in a Separate Account.” Contract, § 7.07. It adds that “in all other respects, in
exercising our rights, we represent ourselves and not the Plan.” Id.
B. The Crediting Rate
The Contract establishes the formula for determining the Crediting Rate. The Contract
provides several factors that are relevant to this formula. Contract, pp. 22-23.2 These include the
“IAF,” or the “projected balance of the Interest Accumulation Fund.” See Contract § 1.16; § 1.13. It
also considers the “MV,” or the projected Separate Account Balance, which “reflect[s] the fair
market value of the Separate Account.” Id. at § 1.22. Finally, it considers the “net effective yield
available, on the date we determine the new Credited Rate, on assets similar to those in the Separate
Account.” Id. at p. 23. Generally, Voya states that considers “projections … based on current
balances or values available on the date [it] determine[s] the new Credit[ing] Rate, and reasonable
assumptions as to cash flows, earnings, and other occurrences” during the Crediting Rate period.
As Ms. Dezelan notes, the Contract gives Voya the ability to change the Crediting Rate
formula, and the exhibit in the record only describes the one that it “currently use[s].” Contract §
2.08 (“The Credit[ing] Rate is determined by us. It reflects our assumptions. … The formula we
currently use … is described in the attached … exhibit.”). Voya may change the Crediting Rate
formula or the rate itself with 30 days’ advance written notice to participants, but that the change will
not apply if a participant gives a discontinuance notice before the change is effective. Id. at p. 23.
C. General and Separate Account Stable Value Funds
Ms. Dezelan refers to two types of stable value funds in her Complaint. “Separate account”
stable value funds utilize “a separate account established by [the] bank or insurance company for the
sole purpose of holding the invested assets.” Lemke & Lins at § 2:143 (“In addition to increased

2

The formula is provided in an Exhibit to the Contract, rather than the Contract itself. Section 2.08 of the 2014
Contract states that “[t]he Credited Rate is determined by us. ... The formula we currently use is described in the
attached Credited Rate Determination Exhibit.” Contract § 2.08.

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flexibility and transparency, the separate account also provides an additional level of comfort
because the underlying assets are segregated from those of the bank or insurance company.”). In
“general account” stable value funds, by contrast, “the underlying assets are held by the bank or
insurance company,” alongside the bank’s other assets. Lemke & Lins § 2:143. In these, “the
guarantee obligation is a general obligation of the issuer, backed by its financial strength.” Id.
The Contract does not refer to Plan assets held in a general account stable value fund, but
explains the Plan’s separate account fund in more detail. It clarifies that the Separate Account is a
“segregated asset account [that Voya] established under Connecticut law.” Contract § 1.21
(“Deposits to this contract are allocated to a Separate Account.”). Under the Contract, the assets in
the Separate Account are “not chargeable with liabilities arising out of any of [Voya’s] other
business,” but are owned by Voya. Id. at § 2.14. Indeed, the Contract specifically states that Voya
“own[s] the investments held in a Separate Account” and is “not the trustee of such assets.” Id.
D. Ms. Dezelan’s Allegations
Ms. Dezelan alleges that Voya earns undisclosed profits from the Plan and its participants by
depressing the Crediting Rate, so that the value of the Interest Accumulation Fund, and the amount of
money available to the Plan, is artificially low. She claims that Voya keeps the difference between
the Crediting Rate and the Rate of Return, which she calls the “Spread.” With the Crediting Rate set
artificially low, Voya can “collect[] hundreds of millions of dollars annually in undisclosed
compensation from the retirement plans” by keeping the “Spread.” Compl. ¶ 3.
Ms. Dezelan does not allege that she has withdrawn money from the Separate Account or
receives annuities from Voya. Rather, her allegations concern the “accumulation phase” of her
Plan’s Contract. She alleges that Voya breached its fiduciary duties to the Plan during this period,
reducing the amount of Plan funds that would eventually be available for her to withdraw. See Lau v.
Metropolitan Life Ins. Co., 15-cv-09469 (PKC), 2016 WL 5957687 (S.D.N.Y. Aug. 22, 2016), *3
(explaining, when reviewing a similar investment product, that an ERISA plaintiff can challenge a
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contract that provides for guaranteed benefits “during its accumulation phase,” even if an exception
to ERISA would be applicable “once contractually guaranteed fixed payouts began.”) (citing John
Hancock Mut. Life Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86, 89 (1993)).
Ms. Dezelan emphasizes that Voya “has the sole and exclusive discretion to determine the
Crediting Rate for a given Crediting Period,” and alleges that it sets the Crediting Rate “well below
the internal rate of return.” Compl. ¶ 2. Specifically, she references one of Voya’s internal audits to
allege that the company “earns 6.1% on assets [in the Separate Account] and makes and takes a
Spread of as much as 3.2% on assets invested in the stable value funds.” Id. at ¶¶ 48-49; see also id.
at ¶ 51 (alleging, with regard to general account plans, that Voya “similarly directly sets and controls
the spread … and therefore directly controls its own compensation”). At oral argument, Ms. Dezelan
alleged that Voya made similar profits in 2009, 2010, 2011, and 2012, and that the total “Spread” for
these years was over twenty million dollars.
Ms. Dezelan also alleges that Voya does not disclose the “Spread” to plans and participants,
who “have no way of knowing how much extra, undisclosed profit [Voya] makes on the investment
of Plan assets.” Compl. at ¶¶ 3, 53. This alleged obfuscation works in concert with the “substantial
restrictions and financial penalties on transfers” that Voya imposes on stable value fund plans, to
“effectively prevent[] a Plan from terminating a stable value fund.” Id. at ¶ 21. In this way, “plan
fiduciaries are effectively precluded from making determinations concerning the reasonableness of
the Crediting Rate,” or from replacing their fund with another stable value fund if they determine that
Voya’s Crediting Rate is unreasonable. Id. at ¶ 25.
Ms. Dezelan also alleges that Voya “likely transfers funds” between the Separate Account
and its general account. Compl. ¶¶ 30, 34. She argues that Voya “reserves to itself the right in its
sole discretion to determine” whether Plan assets should be held in the [Separate Account] or in
Voya’s general account. Id. at ¶ 21. In exercising this discretion, Ms. Dezelan alleges, Voya
“withhold[s] the reserves that are carved out from [Separate Account] assets,” reducing the assets
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available for Plan participants. Id. at ¶ 33. It also “reserves to itself the right to transfer and in fact
transfers funds between the [Separate Account] and [its general account]” at its sole discretion. Id. at
¶ 34. At oral argument, Ms. Dezelan clarified that she does not allege that the Contract permits these
transfers, but contends that Voya makes them anyway.
E. The Present Action
Ms. Dezelan makes three claims against Voya. The essence of all three claims is that Voya
unlawfully profited by setting the Crediting Rate for its stable value funds for its own benefit. See,
e.g. Compl. ¶¶ 72, 87, 94 (describing Voya’s “setting and resetting [of] the Crediting Rates
applicable to the stable value funds,” and “determining the level of its own compensation.”).
First, Ms. Dezelan alleges that Voya violated Section 406(a)(1)(C) of ERISA, which provides
that a fiduciary shall not cause a plan to engage in a transaction if it knows that the transaction
constitutes direct or indirect furnishing of goods or services by a “party in interest to a plan.”
Compl. ¶¶ 75-85 (citing 29 U.S.C. § 1106(a)(1)(C)). Second, she argues that Voya violated Section
406(b)(1) of the law, which prohibits a fiduciary from “deal[ing] with plan assets in his own interest
or for his own account.” Id. at ¶¶ 86-87 (citing 29 U.S.C. § 1106(b)(1)). Finally, she argues that
Voya breached the fiduciary duties it owed to the Plan, in violation of Section 404(a)(1). Id. at ¶¶
93-96 (citing 29 U.S.C. § 1104(a)(1)).
Ms. Dezelan seeks to represent a class that includes participants in “all ERISA covered
employee pension benefit plans whose plan assets were invested in Voya Retirement Insurance and
Annuity Company’s Group Annuity Contract stable value funds within the six years prior to, on or
after July 26, 2016.” Compl. at ¶ 63.
II.

Standard of Review
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted

as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). To state a plausible
7

claim for relief, the plaintiff must plead “factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. “The plausibility standard ...
asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. In assessing the
sufficiency of the complaint, a district court must draw all reasonable inferences in favor of the nonmovant. In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007). The Court accepts as true all
factual allegations in the complaint, “and then determine[s] whether they plausibly give rise to an
entitlement to relief.” Iqbal, 556 U.S. at 679.
“Although courts considering motions to dismiss under Rule 12(b)(6) generally must limit
[their] analysis to the four corners of the complaint, they may also consider documents that are
incorporated in the complaint by reference.” Kermanshah v. Kermanshah, 580 F.Supp.2d 247, 258
(S.D.N.Y. 2008). This is particularly true if the Complaint “‘relies heavily upon [their] terms and
effect,’ which renders the document[s] ‘integral’ to the complaint.” Chambers v. Time Warner, Inc.,
282 F.3d 147, 153 (2d Cir. 2002) (quoting Int’l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62
F.3d 69, 72 (2d Cir. 1995)); see also Blue Tree Hotels Inv. (Canada), Ltd. v. Starwood Hotels &
Resorts Worldwide, Inc., 369 F.3d 212, 222 (2d Cir. 2004) (rejecting allegations that were “belied by
the letters attached” to the complaint); L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 422 (2d
Cir. 2011) (when reviewing a judgment on the pleadings, courts assume facts alleged are true “unless
contradicted by more specific allegations or documentary evidence”).
III.

Discussion
Voya moves to dismiss Ms. Dezelan’s claims under Rule 12(b)(6). It argues that Ms.

Dezelan’s claims concerning Voya’s general account stable value funds should be dismissed because
Ms. Dezelan does not have standing to bring these claims. Ms. Dezelan lacks standing, Voya argues,
because Voya did not offer general account products to her Plan, and because she cannot bring this
claim on behalf of purported class-members who did invest in these products. Def.’s Mem., 16.
Voya also moves to dismiss Ms. Dezelan’s claims concerning the Separate Account product in which
8

she invested, arguing that she fails to state a claim upon which relief may be granted. Id. at 14. The
Court agrees with both of Voya’s arguments.
A. Voya’s General Account Stable Value Funds
Voya argues that Ms. Dezelan’s claims concerning its general account stable value funds
should be dismissed because it did not offer any general account products in the Cedars Sinai Plan,
and because Ms. Dezelan does not have standing to pursue claims concerning plans in which she did
not participate. Def.’s Mem., ECF No. 17-1, 16. Ms. Dezelan responds that “courts routinely …
certify classes, brought by plaintiffs who did not purchase every product encompassed within a class
definition.” Opp. Mem., ECF No. 23, 16. Because she has standing to bring her own claims against
Voya, Ms. Dezelan argues, she can represent class-members who purchased general account
products, even if she herself did not. The Court agrees with Voya. Ms. Dezelan does not have
standing to bring her claims concerning Voya’s general account products. She also does not have
class standing to bring these claims on behalf of potential class members who invested in those
products.
1. Ms. Dezelan’s Standing to Sue
Ms. Dezelan brings all of her claims on behalf of “[a]ll ERISA covered employee pension
benefit plans whose plan assets were invested in [Voya]’s Group Annuity Contract Stable Value
Funds within the six years prior to, on or after July 26, 2016.” Compl. ¶ 63. Voya argues that Ms.
Dezelan is statutorily barred from suing on behalf of plans in which she is not a participant, and that
she lacks constitutional standing to bring these claims as well. Def.’s Mem., 21.
To bring an ERISA suit, a plaintiff must demonstrate both constitutional standing and a cause
of action under ERISA. Am. Psychiatric Ass’n v. Anthem Health Plans, Inc., 821 F.3d 352, 359 (2d
Cir. 2016) (describing an ERISA cause of action, but noting that the question “does not belong to the
family of standing inquiries” because it does not implicate subject-matter jurisdiction).

9

To demonstrate constitutional standing: “(1) the plaintiff must have suffered an injury-infact; (2) there must be a causal connection between the injury and the conduct at issue; and (3) the
injury must be likely to be redressed by a favorable decision.” Kendall v. Employees Ret. Plan of
Avon Prods., 561 F.3d 112, 117-18 (2d Cir. 2009) (citing Lujan v. Defenders of Wildlife, 504 U.S.
555, 560-61 (1992)). In an ERISA action, a plaintiff “must allege some injury or deprivation of a
specific right” that arose from a violation of a duty created by ERISA. Kendall, 561 F.3d at 121.
Generally, a plaintiff has standing to bring an ERISA claim where the plaintiff alleges a causal
connection between defendants’ actions and actual harm to an ERISA plan in which the plaintiff
participates. See LaRue v. DeWolff, Boberg & Associates, Inc., 552 U.S. 248, 256 (2008)
(recognizing that § 1132(a)(2) “does not provide a remedy for individual injuries distinct from plan
injuries”). It is “well established that a plaintiff must demonstrate standing for each claim [s]he seeks
to press.” Mahon v. Ticor Title Ins. Co., 683 F.3d 59, 64 (2d Cir. 2012) (citing DaimlerChrysler
Corp. v. Cuno, 547 U.S. 332, 335 (2006)). “[W]ith respect to each asserted claim,” therefore, “a
plaintiff must always have suffered a distinct and palpable injury to herself.” Id. (internal citations
omitted).
If an ERISA plaintiff brings claims concerning plans in which she did not participate she
lacks the requisite redressability or injury-in-fact to give her standing to sue. See In re Citigroup
Erisa Litig., 104 F. Supp. 3d 599, 612-13 (S.D.N.Y. 2015), reconsideration denied In re Citigroup
ERISA Litig., 112 F. Supp. 3d 156 (S.D.N.Y. 2015), and aff’d sub nom. Muehlgay v. Citigroup Inc.,
649 F. App’x 110 (2d Cir. 2016), cert. denied, 137 S. Ct. 583, 196 L. Ed. 2d 445 (2016) (“There are
no named plaintiffs that qualify as participants or beneficiaries for the Citibuilder Plan. ….
Accordingly, the plaintiffs do not have standing to seek relief under the Citibuilder Plan.”); see also
In re SLM Corp. ERISA Litig., No. 08-4334, 2010 WL 3910566, at *12 (S.D.N.Y. Sept. 24, 2010),
aff’d sub nom., Slaymon v. SLM Corp., 506 F. App’x 61, 65 (2d Cir. 2012) (plaintiffs who “have
neither participated in nor been beneficiaries of the Retirement Plan” would not benefit from
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recovery sought in claims concerning the Retirement Plan—the “repayment of losses”—and
therefore did not have standing to bring those claims) (citing Connecticut v. Physicians Health Servs.
of Connecticut, Inc., 287 F.3d 110, 118 (2d Cir.2002) (finding lack of Article III standing because
“[n]one of the remedies being sought would flow to the [plaintiff]”)); Gates v. United Health Grp.
Inc., No. 11 CIV. 3487 (KBF), 2012 WL 2953050, at *9 (S.D.N.Y. July 16, 2012) (ERISA plaintiff
lacked standing to pursue class action claims “which relate to any ERISA plan … in which she was
not a participant or beneficiary.”) (internal citations omitted).
Because Ms. Dezelan did not own any general account stable value funds, she cannot show
that any of Voya’s alleged misdeeds concerning those funds caused her to suffer a “distinct and
palpable injury,” and therefore lacks standing to bring all three causes of action to the extent that they
relate to those products. Mahon, 683 F.3d at 64; see also Cent. States Se. & Sw. Areas Health &
Welfare Fund v. Merck-Medco Managed Care, L.L.C., 433 F.3d 181, 202 (2d Cir. 2005) (“Central
States I”) (remanding because “serious questions remain as to whether the Individual Plaintiffs have
demonstrated how [Defendant’s] alleged wrongdoings caused any injury to any individual or entity
other than the Plans that [Defendant] contracted with,” and noting that the record lacked any
“demonstration of individualized harm.”).
An ERISA plaintiff must be a participant or beneficiary of an ERISA-covered plan before
bringing a cause of action. Section 502(a) of ERISA provides that a civil action may be brought “by
a participant or beneficiary” of an ERISA plan. 29 U.S.C. § 1132(a)(1); see also id. at § 1132 (a)(3)
(allowing a “participant, beneficiary, or fiduciary” to sue for injunctive relief).3 “The Supreme Court
has construed § 502 narrowly to allow only the stated categories of parties to sue for relief directly
under ERISA.” Nechis v. Oxford Health Plans, Inc., 421 F.3d 96, 100-01 (2d Cir. 2005); see also
Franchise Tax Bd. v. Construction Laborers Vacation Trust for S. Cal., 463 U.S. 1, 27 (1983)

3

Ms. Dezelan brings her first claim under § 502(a)(3), 29 U.S.C. § 1132(a)(3), her second under both 502(a)(3) and
502(a)(2), 29 U.S.C. § 1132(a)(2), and her third under 502(a)(2), 29 U.S.C. § 1132(a)(2).

11

(“ERISA carefully enumerates the parties entitled to seek relief under [§ 502(a)(3)]; it does not
provide anyone other than participants, beneficiaries, or fiduciaries with an express cause of
action.”); Chemung Canal Trust Co. v. Sovran Bank/Maryland, 939 F.2d 12, 14 (2d Cir.1991)
(noting that § 1132(a) “names only three classes of persons who may commence an action,”
including a participant or beneficiary, the Secretary of Labor, and a fiduciary).
In other words, while “ERISA’s goal of deterring fiduciary misdeeds” supports a “broad view
of participant standing under ERISA,” Central States I, 433 F.3d at 200 (internal citations omitted), a
claimant must show that she is a participant or beneficiary of the investment plan that she challenges
in order to make a claim under Section 502(a) of ERISA. Ms. Dezelan alleges that she was a
member of a Plan whose assets were invested in Voya’s Separate Account 896. The record does not
indicate, however, that her Plan had any relationship to or interest in Voya’s general account
products.
Ms. Dezelan does not dispute Voya’s contention that it did not offer a general account stable
value fund through the Cedars Sinai Plan. While her Complaint concerns hypothetical general
account products, she does not allege that she was a “participant, beneficiary or fiduciary,” Chemung
Canal Trust, 939 F.2d at 14, of a general account stable value fund, and therefore does not have
standing to bring claims concerning these products.
2. Class Standing
Ms. Dezelan nevertheless argues that she has “class standing” to pursue her claims regarding
Voya’s general account stable value funds. Pl.’s Surreply, 2-3. Class standing is appropriate, she
argues, because her allegations about the Separate Account product in which she did invest
“implicate[] the same concerns as the conduct alleged” about the general account products. Id.
(citing NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012).
The Court disagrees.

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Once a putative class representative has established standing to sue a defendant on at least
one claim, she can assert “class standing” if she plausibly alleges “(1) that [s]he personally has
suffered some actual ... injury because of the putatively illegal conduct of the defendant,” thus
satisfying Article III standing requirements, and “(2) that such conduct implicates ‘the same set of
concerns’ as the conduct alleged to have caused injury to other members of the putative class by the
same defendants.” NECA, 693 F.3d at 162 (internal citations omitted). This test insures that “the
named plaintiff’s litigation incentives are sufficiently aligned with those of the absent class members
that the named plaintiff may properly assert claims on their behalf.” Ret. Bd. of the Policemen’s
Annuity & Ben. Fund of the City of Chicago v. Bank of New York Mellon, 775 F.3d 154, 157 (2d Cir.
2014), cert. denied sub nom. Ret. Bd. of Policemen’s Annuity & Annuity & Ben. Fund of City of
Chicago v. Bank of New York Mellon, 136 S. Ct. 796 (2016) (“Retirement Board”). It is “derive[d]
from constitutional standing principles [and is] distinct from the criteria that govern whether a named
plaintiff is an adequate class representative under Rule 23(a).” Id. (citing NECA, 693 F.3d at n. 9).
When a claim on behalf of an unnamed class-member involves similar inquiries and proof as
the named plaintiff’s claim, the “same set of concerns” are implicated and the named plaintiff has
class standing to bring the claim. NECA, 693 F.3d at 162. In NECA, the plaintiff, a large
institutional investor, alleged that Goldman Sachs violated the Securities Act by making material
misrepresentations in the Offering Documents for certain mortgage backed certificates (the
“Certificates”) that it issued. See NECA, 693 F.3d at 149. Specifically, the plaintiff alleged that
Goldman Sachs misrepresented the underwriting guidelines of the lenders who issued the mortgage
loans that the investor eventually purchased through the different Certificates. Id. The Certificates
were sold in seventeen separate offerings using seventeen separate Prospectus Supplements, each of
which contained the same “shelf registration statement.” Id. NECA bought Certificates issued on
only two of the offerings, but asserted claims on behalf of the purchasers of Certificates from all
seventeen offerings. Id.
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After noting that NECA had “standing to sue defendants in its own right,” NECA, 693 F. 3d at
158, the court held that NECA had class standing to pursue some of its claims concerning Certificates
it did not own, because those claims implicated the “same set of concerns” as those of absent class
members who did own the Certificates. See id. at 164. Specifically, it concluded that NECA had
standing to pursue claims concerning Certificates that contained loans originated by the same lenders
as those backing the Certificates that it had purchased. Id. These claims “raise[d] a sufficiently
similar set of concerns to permit [NECA] to purport to represent Certificate-holders from those
Offerings.” Id. at 163. The court emphasized that all of these claims turned on the same proof:
whether or not Goldman’s description of the lenders’ underwriting processes “falsely” or
“misleadingly” represented the individual lender’s actual process. Id. at 163.
In Retirement Board, by contrast, the Second Circuit held that the plaintiff did not have class
standing to bring breach of contract claims on behalf of investors in over five hundred trusts when
the plaintiff had invested in only twenty-six of the trusts itself. Retirement Board, 775 F.3d at 162.
The Second Circuit compared the plaintiffs’ claims concerning the twenty-six trusts and the absent
class members’ claims concerning the remaining trusts. Id. It concluded that these claims did not
“share the same set of concerns,” because proving that the defendant had duty to act “require[d]
examining its conduct with respect to each trust.” Id. (noting that there was “no way in which
answering these questions for the trusts in which Plaintiffs invested w[ould] answer the same
questions for the numerous trusts in which they did not invest.”). Unlike the claims in NECA, the
court explained, Retirement Board’s Complaint involved misconduct that “must be proved loan-byloan and trust-by-trust.” Id. at 155-57. The plaintiffs’ claims were simply too distinct from those of
the absent class-members to merit class standing.
Voya argues that the Plan’s Separate Account stable value fund is distinct from its general
account product because the separate account assets are insulated from any of Voya’s other
businesses, so that income and gains or losses are credited or charged directly to the Separate
14

Account. Def.’s Surreply, 7. “In the hypothetical general account product alleged in the Complaint,”
Voya explains, “the general account assets are commingled with the insurance company’s own
assets,” which the company invests. Id. Ms. Dezelan responds that her claims concerning the
separate and general account products implicate the same conduct. Pl.’s Surreply, 4. Both sets of
claims allege that “by ‘holding’ assets in the general account —including assets allocated to separate
account stable-value products — [Voya] can control the spread and directly control its own
compensation.” Id. (citing Compl. ¶¶ 39-53).
The Court agrees with Voya. Ms. Dezelan’s claims concerning the general account products
do not involve the “same set of concerns,” NECA, 693 F.3d at 162, as her claims concerning Separate
Account stable value funds. To succeed on her Separate Account claims, Ms. Dezelan would have to
show that Voya improperly transferred assets from the Separate Account to its general one, and
thereafter pocketed some of the alleged “Spread.” For the general account claims, the “Spread” was
allegedly in Voya’s general account the entire time, meaning that Ms. Dezelan would not need to
prove that Voya transferred the “Spread” to its own account. Moreover, Voya asserts that the two
types of products involve different contracts, and may have different Crediting Rate formulas. As in
Retirement Board, Ms. Dezelan seeks to assert, on behalf of absent class members, claims that are
distinct and require different proof from those she brings on her own.
Significantly, the claims concerning Voya’s Separate Account products may be more difficult
to maintain, because they require the extra step of proving that Voya transferred Separate Account
assets into its own account. Furthermore, regardless of the difficulty of maintaining each claim, Ms.
Dezelan does not have a concrete interest in bringing claims concerning Voya’s general account
products. She did not own any of these products, and provides no information to suggest that the
products were similar to the ones she actually did own, a factual allegation necessary for class
standing. Without additional allegations about the two Voya products in question, the Court cannot
conclude that Ms. Dezelan “has a sufficiently personal and concrete stake in proving other, related
15

claims against the defendant.” NECA, 693 F.3d at 164. At this point, the Court cannot say that “the
proof contemplated for all of [Ms. Dezelan’s] claims [is] sufficiently similar,” NECA, 693 F.3d at
164, to merit class standing under NECA and Retirement Board.
3. Standing under Fallick v. Nationwide
Ms. Dezelan argues that she has standing to bring her ERISA claims under Fallick v.
Nationwide Mut. Ins. Co., 162 F.3d 410 (6th Cir.1998), which states that “an individual in one
ERISA benefit plan can represent a class of participants in numerous plans other than h[er] own, if
the gravamen of [her] challenge is to the general practices which affect all of the plans.” Opp. Mem.,
17 (citing Fallick, 162 F.3d at 422-23). Ms. Dezelan also cites Haddock v. Nationwide Fin. Servs.,
Inc., urging the court to reserve judgment on Ms. Dezelan’s ability to bring general account claims
until the class certification stage of this litigation. See Opp. Mem., 18 (citing Haddock, 262 F.R.D.
97 (D. Conn. 2009), vacated and remanded sub nom. Nationwide Life Ins. Co. v. Haddock, 460 F.
App’x 26 (2d Cir. 2012)). Citing Fallick, the court in Haddock decided that once “individual
standing [wa]s established” in a putative class action, it would evaluate the claims of putative class
members using the requirements of Rule 23, rather than as part of the standing analysis. Id. at 111
(citing Fallick, 162 F.3d at 423-22).
Neither the Sixth Circuit’s decision in Fallick nor this Court’s ruling in Haddock sufficiently
support a ruling that class standing is appropriate here. As an initial matter, the Court notes that
courts in this Circuit have not universally adopted Fallick’s rule. See, e.g. In re Commodity Exch.,
Inc., --- F.Supp.3d ----, No. 14-MD-2548 (VEC), 2016 WL 5794776 (S.D.N.Y. Oct. 3, 2016) at *29
(“The ‘juridicial link’ doctrine has been adopted in various ways by other circuits, … but the Second
Circuit has rejected this doctrine, stating that a plaintiff must demonstrate standing for each claim she
seeks to press.”) (internal citations omitted); Gates, 2012 WL 2953050, at *9 (dismissing case to the
extent that plaintiff “purports to bring claims, class or otherwise, related to any UHG plan[] other
than the one in which she participated,” because “courts have repeatedly rejected plaintiff’s proposed
16

reading of Fallick.”). In any event, both decisions predate this Circuit’s rulings in NECA and
Retirement Board and therefore cannot be used as binding precedent on the issue of class standing.
For the reasons discussed above, Ms. Dezelan does not have standing to bring her claims
concerning the general account stable value funds. Furthermore, she cannot bring her claims on
behalf of purported class-members who invested in general account products. Dismissal for lack of
class standing is appropriate at the motion to dismiss stage. See Retirement Board, 775 F.3d at 163
(affirming dismissal for lack of class standing at motion to dismiss stage); Merryman v. J.P. Morgan
Chase Bank, N.A., No. 15-CV-9188 (VEC), 2016 WL 5477776, at *14 (S.D.N.Y. Sept. 29, 2016)
(dismissing for lack of class standing because the “plaintiffs have not explained how they have a
personal and concrete stake in proving this case relative to ADRs that they do not own beyond the
notion that introducing such evidence might augment the evidence supporting their own claims,” and
citing cases). Ms. Dezelan’s claims regarding Voya’s general account products therefore will be
dismissed.
B. Separate Account Products
Voya argues that Ms. Dezelan’s claims concerning Voya’s separate account stable value
funds should be dismissed because they “rest on the incorrect assumption” that Voya set the Credited
Rate at its own discretion and “retained” the spread produced by that rate. Def.’s Mem., 15. Ms.
Dezelan challenges this assertion by pointing to language in the Contract that gives Voya the power
to set the Credited Rate and use “Separate Account assets for its own benefit.” Opp. Mem., 14. The
Court disagrees. Even if the Court agreed with Ms. Dezelan’s understanding of the Crediting Rate,
she does not state a claim upon which relief can be granted.
Ms. Dezelan claims that Voya violated Section 404(a)(1) of ERISA, which requires a
fiduciary’s loyalty and prudence, see 29 U.S.C. § 1104(a) (describing the “prudent man standard of
care”), as well as two subsections of Section 406. Specifically, she cites Section 406(a)(1)(C), which
prohibits a fiduciary from causing “the plan to engage in a transaction [with] a party in interest,” id.
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at § 1106(a)(1)(C), and Section 406(b)(1), which prohibits a fiduciary from “deal[ing] with plan
assets in his own interest or for his own account.” Id. at § 1106(b)(1).
Under ERISA, a person is a fiduciary with respect to a plan to the extent “(i) he exercises any
discretionary authority or discretionary control respecting management of such plan or exercises any
authority or control respecting management or disposition of its assets, (ii) he renders investment
advice for a fee or other compensation ... with respect to any moneys or other property of such plan,
or has any authority or responsibility to do so, or (iii) he has any discretionary authority or
responsibility in the administration of such plan.” 29 U.S.C. § 1002(21)(A); see also Mertens v.
Hewitt Assocs., 508 U.S. 248, 251 (1993) (ERISA “provides that ... anyone ... who exercises
discretionary control or authority over the plan’s management, administration, or assets, is an ERISA
fiduciary.”) (citing 29 U.S.C. §§ 1102(a) and 1002(21)(A)).
A party’s fiduciary status under ERISA “must be determined by focusing on the function
performed, rather than on the title held.” Blatt v. Marshall & Lassman, 812 F.2d 810, 812–13 (2d
Cir. 1987) (internal citations omitted). An entity must “exercise[] actual control over the disposition
of plan assets,” but “need not have absolute discretion with respect to a benefit plan in order to be
considered a fiduciary.” Id. (adding that “fiduciary status exists with respect to any activity
enumerated in the statute over which the entity exercises discretion or control.”).
When a party is responsible “for providing investment advice for a fee,” the party has
fiduciary status under ERISA. Severstal Wheeling, Inc. Ret. Comm. v. WPN Corp., 119 F. Supp. 3d
240, 263 (S.D.N.Y. 2015), aff’d sub nom. Severstal Wheeling, Inc. v. WPN Corp., 659 F. App'x 24
(2d Cir. 2016) (citing 29 U.S.C. § 1002(21)(A)(ii)). Courts have also found that an investment
advisor owes fiduciary duties to an ERISA plan where the advisor provided regular, individualized
investment advice that served as a “primary basis for investment decisions with respect to plan
assets.” Id. (citing Goldenberg v. Indel, Inc., 741 F.Supp.2d 618, 627 (D.N.J. 2010) (citing 29 C.F.R.
§ 2510.3–21(c)).
18

In any event, Voya does not argue that it is not a fiduciary in this context. Moreover, under
the Contract, Voya was empowered to invest Separate Account assets in certain “investment
vehicles,” subject to the constraints set by the Contract. Contract, p. 24; see also id. at § 2.11
(“Amounts in a Separate Account are invested consistent with the investment objectives [Voya] set
for that Separate Account.”). In other words, the Complaint sufficiently states a claim that Voya had
“discretionary control” over the plan’s assets and is a fiduciary under ERISA. See Mertens, 508 U.S.
at 251; see also Blatt, 812 F.2d at 812-13 (an entity must “exercise[] actual control over the
disposition of plan assets,” but “need not have absolute discretion with respect to a benefit plan in
order to be considered a fiduciary.”); Contract at § 7.07 (“[I]f the Plan is subject to [ERISA, Voya is]
acting as a fiduciary, as defined in section 3(38) of ERISA, solely with respect to the management of
Plan funds held in a Separate Account. … In all other respects, in exercising our rights, we represent
ourselves and not the Plan.”).
1. Breach of Fiduciary Duty Claim
ERISA provides that a fiduciary has the obligation to discharge its duties, including its
investment decisions, “solely in the interest of the participants and beneficiaries” and “for the
exclusive purpose” of providing benefits to participants and their beneficiaries. 29 U.S.C. §
1104(a)(1). This duty is broad, and is informed by both the terms of ERISA and the common law of
trusts. See Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 110-11 (1989). Indeed, ERISA’s
fiduciary obligations are the “highest known to the law.” Donovan v. Bierwirth, 680 F.2d 263, 272
n.8 (2d Cir. 1982), cert. denied, 459 U.S. 1069 (1982). ERISA requires a fiduciary’s “complete
loyalty,” but fiduciaries “do not violate their duties [to a pension plan] by taking action which, after
careful and impartial investigation, they reasonably conclude is best to promote the interests of
participants and beneficiaries,” even if the decision “incidentally benefits” the fiduciary. Id. at 271.
To state a claim for a violation of fiduciary duty under ERISA, a plaintiff must “plausibly
allege[] that a prudent fiduciary in the same position could not have concluded that the alternative
19

action would do more harm than good.” Amgen Inc. v. Harris, 136 S. Ct. 758, 760 (2016) (internal
marks and citations omitted); Bd. of Trustees of Operating Engineers Pension Trust v. JPMorgan
Chase Bank, Nat. Ass’n, No. 09-CIV-9333 KBF, 2013 WL 1234818, at *12 (S.D.N.Y. Mar. 27,
2013) (denying motion to dismiss ERISA duty of loyalty claim when plaintiff pled that the
“defendant gambled that [an investment] would survive when it was the Plan’s investment at risk
[and when the Defendant] stood to … profit if the investment paid off”); see also State St. Bank and
Trust Co. v. Salovaara, 326 F.3d 130, 136 (2d Cir.2003) (“This statutory duty of loyalty has been
described by this Court as requiring that a fiduciary act, in Judge Friendly's felicitous phrase, with an
‘eye single to the interests of the participants and beneficiaries.”) (citing Donovan, 680 F.2d at 271)).
The Second Circuit has held that an ERISA complaint may rely on “circumstantial factual
allegations to show a breach of fiduciary duties under ERISA,” as long as the allegations give “rise to
a ‘reasonable inference’ that the defendant committed the alleged misconduct.” Pension Ben. Guar.
Corp. ex rel. St. Vincent Catholic Med. Centers Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712
F.3d 705, 718 (2d Cir. 2013) (citing Iqbal, 556 U.S. at 678). “[C]ourts may draw a reasonable
inference of liability when the facts alleged are suggestive of, rather than merely consistent with, a
finding of misconduct.” Id. (citing N.J. Carpenters Health Fund v. Royal Bank of Scot. Grp., PLC,
709 F.3d 109, 121 (2d Cir.2013)).
Ms. Dezelan’s claims concerning the Separate Account have two main components. First,
she alleges that Voya manipulates the Crediting Rate to its own advantage. To support this claim,
Ms. Dezelan alleges that between 2009 and 2014, Voya’s Crediting Rate was generally several
percentage points below the actual rate of return on the investments in the Separate Account,
generating, in her estimation, tens of millions of dollars as “Spread.”
Second, she alleges that Voya kept the “Spread” produced by the artificially low Crediting
Rate, rather than using the Spread to stabilize the assets in the Separate Account. Ms. Dezelan
alleges fewer facts to support this claim. She alleges that Voya “likely transfers” funds between the
20

Separate Account and its own general account at its sole discretion. Compl. ¶ 34. She argues that
Connecticut law allows insurance companies to hold separate account assets in its general account.
Opp. Mem., 13. (citing Regs. Conn. State Agencies § 38a-459-12(d)(6)(D)) (referring to “the manner
in which account assets shall be allocated between the separate account, any supplemental account,
and the general account”); see also id. at § 38a-459-16(a) (“An insurance company, at all times, shall
hold sufficient assets in the general account, the separate account, or supplemental accounts, as
appropriate, such that the value of the account assets, valued as if the assets were held in the
insurance company’s general account, equals or exceeds the reserve required for contracts supported
by the separate account, determined as if the contracts were held in the general account.”). At oral
argument, however, she conceded that the Contract does not allow Voya to keep Separate Account
assets, or take the Spread, before the Contract’s termination.
Ms. Dezelan’s Complaint does not plausibly allege that Voya keeps the Spread that it earns
from the Plan’s Separate Account assets in its own account. Even if the Court concluded that Voya
artificially depresses the Crediting Rate and creates a “Spread,” it cannot conclude, without more,
that the Spread goes to Voya instead of remaining in the Separate Account. The allegations therefore
do not give rise to a “reasonable inference of [Voya’s] misconduct,” Pension Ben., 712 F.3d at 718,
and the Court must grant Voya’s motion to dismiss Ms. Dezelan’s claim under Section 404(a) of
ERISA.
2. Prohibited Transactions Claims
In addition to the general fiduciary duties of loyalty and prudence, ERISA also regards
specific types of transactions between a plan and related persons, or “parties in interest,” as
inherently susceptible to abuse. These transactions are prohibited in Section 406 of ERISA. See 29
U.S.C. § 1106; see also Harris Trust & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 241
(2000) (citation omitted) (Congress “supplement[ed]” ERISA’s general duty of loyalty by enacting
29 U.S.C. § 1106, which “categorically bar[s] certain transactions deemed likely to injure the pension
21

plan.”). The Second Circuit has held that courts should interpret Section 406 broadly in favor of plan
beneficiaries and that a violation of this provision of ERISA may be demonstrated without a showing
of bad faith or even in the presence of a reasonable transaction. See Lowen v. Tower Asset Mgmt.,
Inc., 829 F.2d 1209, 1213 (2d Cir.1987). It also places the “burden of proof … on the party to the
self-dealing transaction to justify its fairness.” Marshall v. Snyder, 572 F.2d 894, 900 (2d Cir. 1978).
Ms. Dezelan invokes Section 406(a)(1)(C), which prohibits transactions with “part[ies] in
interest to a plan,” and Section 406(b)(1), which prohibits fiduciaries from “deal[ing] with plan assets
in [their] own interest.” See 29 U.S.C. § 1106(a)-(b).
a. Section 406(a)(1)
To state a claim under Section 406(a)(1), plaintiff must allege that a fiduciary made an
expenditure to a party in interest, which then shifts the burden to the fiduciary to show that the
expenditure was reasonable. N.Y. State Teamsters Council Health & Hosp. Fund v. Estate of
DePerno, 18 F.3d 179, 183 (2d Cir.1994)); see also Braden v. Wal-Mart Stores, Inc., 588 F.3d 585,
601 (8th Cir. 2009). Fiduciaries or other “person[s] providing services” to a benefit plan are
considered parties in interest under Section 406(a). 29 U.S.C. § 1002(14)(A)-(B).
A claim under Section 406(a) therefore can survive a motion to dismiss, if it suggests that a
fiduciary made payments or diverted funds to a party in interest. In Braden, the Ninth Circuit found
sufficient the plaintiff’s allegation that the defendant received “revenue sharing payments [that] far
exceeded the value of services actually performed” and “kickbacks” in exchange for investing in
certain mutual funds. Braden, 588 F.3d at 600; see also Moreno v. Deutsche Bank Americas Holding
Corp., No. 15 CIV. 9936 (LGS), 2016 WL 5957307, at *7 (S.D.N.Y. Oct. 13, 2016) (denying motion
to dismiss prohibited transaction claim based on allegations that defendant fiduciaries received
inflated investment management fees). In Moreno, the court declined to dismiss the plaintiff’s
claims under Section 406 because the plaintiff had alleged that the fiduciaries invested in Deutsche
Bank’s “proprietary index funds,” which charged excessive fees. The plaintiff specifically alleged
22

that the fiduciaries selected funds that “charged fees that were more than eleven times higher than a
comparable Vanguard index fund,” from which the fiduciaries—as subsidiaries of Deustche Bank—
stood to benefit. Id. at *6; see also Grodotzke v. Seaford Ave. Corp., 17 F. Supp. 3d 185, 194
(E.D.N.Y. 2014) (denying motion to dismiss claims under Sec. 406 when plaintiffs alleged that
fiduciaries, who had complete control over the plaintiff’s funds, “diverted [certain] proceeds and/or
withheld plan assets for their own use.”). In Grodotzke, the plaintiffs had alleged that fiduciaries
“diverted” plaintiffs’ assets “for their own personal use and benefit,” by keeping money from
construction projects that, under their contract with the plaintiffs, should have been forwarded to the
plaintiffs. Id. at 193. The court reviewed allegations that the defendants used the diverted assets to
pay creditors and buy property, and concluded that the plaintiffs had stated a claim for a violation of
29 U.S.C. § 1106(a) and (b). Id. at 194.
In contrast, Ms. Dezelan alleges that Voya “likely transfers funds between the [Separate
Account] and [its general account]” at its sole discretion, but she does not allege that such a transfer
occurred. Compl. ¶ 34. She notes that Connecticut law permits Voya to hold Separate Account
assets in its own account and to retain the “Spread” if the contract is discontinued, but she has not
alleged facts that suggest that Voya has abused its discretion by retaining any Plan assets. See Opp.
Mem., 13 (citing Connecticut General Statutes § 38a-459-12(d)(6)(D)). Unlike the plaintiffs in
Grodotzke, she does not allege a specific instance when Voya “diverted” Plan assets or used Plan
assets “for [its] own personal use and benefit.” Grodotzke, 17 F. Supp. 3d at 193. Rather, she alleges
that Connecticut law gave Voya the discretion to keep the Spread, and that it “likely” does so. The
Court cannot presume that Voya engaged in a prohibited transaction just because it had the ability to
do so. Without more, Ms. Dezelan’s claim under Section 406(a)(1) must be dismissed.
While ERISA’s prohibited transaction provision is broad, and demands “complete loyalty” to
Plan participants, Donovan, 680 F.2d at 271, the Complaint “must give rise to a reasonable inference

23

that the defendant committed the alleged misconduct.” Pension Benefit, 712 F.3d at 718. Ms.
Dezelan’s Complaint fails to meet this burden.
b. Section 406(b)(1)
Section 406(b)(1) of ERISA prohibits fiduciaries from “deal[ing] with the assets of the plan
in [their] own interest[s] or for [their] own account[s].” 29 U.S.C. § 1106(b)(1). The provision
prohibits fiduciaries from “paying themselves from Fund assets.” Whitfield v. Tomasso, 682 F. Supp.
1287, 1304 (E.D.N.Y. 1988); LaScala v. Scrufari, 330 F. Supp. 2d 236, 254 (W.D.N.Y. 2004), as
amended on reconsid. (July 23, 2004) (noting that Section 406(b)(1) “suggests that a fiduciary,
normally permitted to receive reasonable compensation for services rendered ... may not if selfdealing is involved in the transaction securing the payment”). Liability may be imposed under §
1106(b) “even where there is no taint of scandal, hint of self-dealing, [or] no trace of bad faith.”
Lowen, 829 F.2d at 1213 (internal citations omitted).
A court must, however, assess the Complaint to determine whether it states a claim upon
which relief can be granted. Ms. Dezelan argues that Voya violated Section 406(b)(1) by
“compensating” itself by keeping the “Spread.” See Compl. ¶¶ 86-87. As explained above, Ms.
Dezelan does not plausibly allege that Voya ever “kept” the Spread. Her claim under Section
406(b)(1) therefore must be dismissed.
F. Leave to Replead
Ms. Dezelan suggested at oral argument that she had prepared an amended complaint.
Because repleading would not be “futile,” Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir. 2000), the
Court dismisses this case without prejudice to renewal.
IV. Conclusion
For the reasons described above, Voya’s Motion to Dismiss is GRANTED without prejudice
to renewal. Should Ms. Dezelan renew her Complaint, she must do so by August 5, 2017.
SO ORDERED at Bridgeport, Connecticut this 6th day of July, 2017.
24

/s/ Victor A. Bolden
VICTOR A. BOLDEN
UNITED STATES DISTRICT JUDGE

25