The International Brotherhood of Teamsters Union Local No. 710 Pension Fund et al v. The Bank of New York Mellon Corporation

Filing 48

OPINION and ORDER. Signed by the Honorable Sara L. Ellis on 2/6/2014: Mailed notice(rj, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
THE INTERNATIONAL BROTHERHOOD
OF TEAMSTERS UNION LOCAL NO. 710
PENSION FUND, and JAMES E. DAWES and
NEAL J. LONDON, Trustees, and THE
INTERNATIONAL BROTHERHOOD OF
TEAMSTERS UNION LOCAL NO. 710
HEALTH & WELFARE FUND, and JAMES
E. DAWES and NEAL J. LONDON, Trustees,
Plaintiffs,
v.
THE BANK OF NEW YORK MELLON
CORPORATION, a Delaware Corporation,
and THE BANK OF NEW YORK MELLON
(f/k/a THE BANK OF NEW YORK),
Defendants.

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No. 13 C 1844
Judge Sara L. Ellis

OPINION AND ORDER
Plaintiffs the International Brotherhood of Teamsters Union Local No. 710 Pension Fund
(the “Local 710 Pension Fund”), the International Brotherhood of Teamsters Union Local No.
710 Health & Welfare Fund (the “Local 710 Health & Welfare Fund,” and, collectively with the
Local 710 Pension Fund, the “Funds”), and James E. Dawes and Neal J. London, trustees of the
Funds, filed a first amended complaint under the Employee Retirement Income Security Act
(“ERISA”), codified at 29 U.S.C. § 1001 et seq., against defendants the Bank of New York
Mellon Corporation (“BNY Mellon Corp.”) and the Bank of New York Mellon (“BNY”). 1 The
Funds bring claims for breach of the duties of prudence and loyalty in violation of ERISA § 404,
29 U.S.C. § 1104, and for violation of ERISA § 406, 29 U.S.C. § 1106. Before the Court is
1

BNY is a subsidiary of BNY Mellon Corp., a holding corporation that was formed after the 2007 merger
of Mellon Financial Corporation and the Bank of New York Company, Inc.

Defendants’ motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). For the
following reasons, Defendants’ motion [26] is denied.
BACKGROUND 2
In 2006, Defendants, global leaders in securities lending, solicited the Funds, which
maintain a conservative investment profile focused on the preservation of principal, to participate
in Defendants’ securities lending program. Briefly, securities lending involves the provision of
temporary loans of security from an institutional investor’s portfolio to another entity in
exchange for collateral, usually in the form of cash. The collateral is then invested in short-term,
liquid instruments until the security is returned. This arrangement generates incremental revenue
on securities being held in custodial accounts for the institutional investor and is not intended to
provide the types of significant investment returns typically associated with speculative
investment strategies.
To convince the Funds to participate, Defendants touted the program’s flexibility,
conservative investment strategy, and low risk. They emphasized that no client had experienced
any losses in the program’s twenty-eight-year history and that Defendants were “a uniquely
positioned major Wall Street clearance bank with credit expertise in the Securities Industry that
is second to none.” First Am. Compl. ¶ 31. Based on Defendants’ representations, the Funds
agreed to participate in the program and executed Securities Lending Agreements and Guaranties
(the “Agreements”) with BNY on or about June 6, 2006. Pursuant to these Agreements, BNY
was appointed the Funds’ agent with full discretion to lend securities to a list of approved

2

The facts in the background section are taken from the Funds’ first amended complaint and the exhibits
attached thereto and are presumed true for the purpose of resolving Defendants’ motion to dismiss. See
Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011).

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borrowers and invest the collateral in an agreed list of approved investments. BNY Mellon
Corp., through its BNY Mellon Asset Servicing division, managed the Funds’ cash investments.
Pursuant to the Agreements, in August and December 2006, Defendants purchased nearly
$25 million of corporate floating rate notes issued by Lehman Brothers Holding Company, Inc.
(“Lehman”) on the Funds’ behalf. These notes bore the CUSIP numbers 52517PL33 and
52517PQ53 (the “Lehman Notes”). Despite increasing uncertainty about Lehman’s financial
stability, as detailed below, Defendants did nothing to protect the Funds’ investments, with the
end result being that, when Lehman filed for bankruptcy on September 15, 2008, Defendants
booked a $24.5 million deficiency to the Funds’ collateral accounts. Although that deficiency
was subsequently reduced by distributions from the Lehman bankruptcy estate and the sale of the
Lehman Notes, the loss remained significant.
More specifically, between February and April 2007, the subprime mortgage industry
collapsed, with various subprime mortgage lenders filing for bankruptcy. This caused S&P and
Moody’s to downgrade bonds and securities that were backed by subprime mortgages. The
crisis continued, with then U.S. Treasury Secretary Hank Paulson warning against relying on
rating agency ratings in view of the failures related to mortgage-backed securities in October
2007. In March 2008, Bear Stearns, then the nation’s fifth largest investment bank, was bought
by JP Morgan Chase at a fraction of its value, and in mid-July 2008, IndyMac Bank was placed
into FDIC receivership. At that time, Bloomberg reported over $435 billion of write-downs and
credit losses related to mortgage-backed securities, collateralized debt obligations, leveraged
loans, and other fixed-income assets since January 2007.
Amidst this crisis, unbeknownst to the Funds but not to Defendants, Lehman’s core
businesses were severely impacted and intense speculation arose regarding Lehman’s future. On

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December 14, 2007, Punk Ziegel & Co. issued an analyst report recommending that Lehman’s
stock be avoided, as the outlook for its business was “not positive.” Id. ¶ 62. On March 17,
2008, a column was published in the Dow Jones Newswires entitled “IN THE MONEY: Why
Lehman May or May Not Be The Next Bear,” which stated that “Lehman has sizable exposure to
dicey mortgage securities and other hard-to-value instruments that could be a drag on its
liquidity” and that Lehman held “$42 billion worth of ‘Level 3’ securities – illiquid, write-downprone securities valued using Lehman’s estimates and models instead of actual market data.” Id.
¶ 64 (emphasis omitted).
Industry players also sounded warning bells about Lehman, with Moody’s lowering its
outlook on Lehman’s rating, UBS downgrading Lehman stock from buy to neutral, and analysts
noting that Lehman was undercapitalized. In June 2008, S&P downgraded its rating of the
Lehman Notes from A+ to A, Fitch downgraded its rating from A+ to A--, and Moody’s changed
its rating outlook on Lehman from stable to negative. That same month, Lehman announced a
second-quarter loss of $2.8 billion—higher than analysts expected—and its CFO and COO both
resigned shortly thereafter. By July 2008, Lehman’s stock price had dropped to less than $17 per
share—a drop of more than 70% since January 2008. At the same time, however, because the
Lehman Notes were still trading at close to par in July 2008, Defendants could have liquidated
the Funds’ holdings in Lehman at little if any loss, but they did not.
Other signs also signaled that holding onto the Lehman Notes was imprudent. In 2007,
the cost of Lehman credit default swaps for one-year notes rose from $6 to $144 and reached
approximately $700 in the first eight months of 2008. By late August 2008, it was reported that
Lehman owned approximately $61 billion in mortgages and asset-backed securities and that its
market capitalization had decreased to approximately $11 billion. On September 9, 2008,

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Lehman’s stock fell to $7.79 and S&P issued a negative watch on Lehman after a state-run South
Korean firm put acquisition talks with Lehman on hold. The situation continued to deteriorate
on a daily basis, even though the Lehman Notes continued to trade close to par value.
Ultimately, Lehman filed for bankruptcy on September 15, 2008. Thereafter, Moody’s
downgraded Lehman’s long term debt rating to B3 from A2, S&P from A to CCC-, and Fitch to
default. The price of Lehman bonds fell further and, by September 18, 2008, they were trading
at only 15% of par value.
Moreover, months before Lehman’s bankruptcy filing, Defendants had removed Lehman
from their approved borrowers list. 3 In a September 15, 2008, press release, Defendants made
clear that they had eliminated their own exposure to Lehman by the time of the bankruptcy
filing. 4 An after-the-fact independent investigation conducted by an examiner appointed by the
bankruptcy court also revealed that, because of its position as one of Lehman’s clearing banks,
BNY knew of Lehman’s deteriorating financial condition before Lehman filed for bankruptcy
and took steps to protect its own interests. For example, by summer 2008, BNY was demanding
collateral deposits from Lehman to secure intraday credit risk. Additionally, on August 20,
2008, BNY entered discussions with Lehman to minimize its exposure to Lehman’s European
commercial paper and medium term note programs, with BNY eventually allowing Lehman to
open a money market account with BNY so as to maintain sufficient deposits to cover BNY’s

3

Defendants attached a copy of the Bank of New York Mellon Securities Lending List of Approved
Borrowers as of September 1, 2008, which includes Lehman, to their motion to dismiss. Ex. 3 to Chan
Decl. Although the Court may consider this document, as it is referred to in the Funds’ first amended
complaint and is central to their claims, see Hecker v. Deere & Co., 556 F.3d 575, 582–83 (7th Cir.
2009), the Court nonetheless credits the Funds’ allegation that Lehman was removed from the list at this
stage because the document Defendants attached does not conclusively demonstrate that Lehman was not
removed from the list at some earlier point.
4
Defendants have attached this press release to their motion to dismiss, arguing that it does not support
the Funds’ allegation. The press release states that Defendants “have no outstanding loans to Lehman.”
Ex. 4 to Chan Decl. This statement, however, can plausibly be read to support the Funds’ allegation.

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forecasted intraday exposure to Lehman. Thus, on September 11, 2008, BNY received an initial
deposit of $125 million from Lehman and held $170 million in collateral the day Lehman filed
for bankruptcy. Despite Defendants’ “specific knowledge and recognition of the growing risks
to Lehman’s viability – and, necessarily, the risks to investments in Lehman such as the Lehman
Notes – and despite the multiple industry and media reports speculating about Lehman’s future
in 2007 and 2008, Defendants failed to do anything with respect to the Funds’ investment in the
Lehman Notes to eliminate or minimize the losses that ultimately materialized when Lehman
declared bankruptcy.” Id. ¶ 10.
LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not
its merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.
1990). In ruling on a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded
facts in the plaintiff’s complaint and draws all reasonable inferences from those facts in the
plaintiff’s favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive a
Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a
claim’s basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct.
1937, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.
Ct. 1955, 167 L. Ed. 2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S. at 678.

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ANALYSIS 5
I.

BNY Mellon Corp. as a Defendant
Defendants argue that BNY Mellon Corp. is not a proper party because it did not contract

with the Funds and is not a fiduciary. See Klosterman v. W. Gen. Mgmt., Inc., 32 F.3d 1119,
1122 (7th Cir. 1994) (“A claim for breach of fiduciary duties under ERISA is only valid against a
‘fiduciary.’ ”). 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, direct
or indirect, 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 discretionary responsibility in the
administration of such plan.
29 U.S.C. § 1002(21)(A). The term “fiduciary” is to be construed broadly, Rogers v. Baxter
Int’l, Inc., 417 F. Supp. 2d 974, 986 (N.D. Ill. 2006), and “a person may be a fiduciary for some
purposes, but not for others,” Plumb v. Fluid Pump Serv., Inc., 124 F.3d 849, 854 (7th Cir.
1997). A person may be considered a functional fiduciary even if not so explicitly named if he
falls within ERISA’s definition of the term. Rogers, 417 F. Supp. 2d at 986.
Here, there is no dispute that based on the Agreements, BNY is a fiduciary. The
Agreements do not mention BNY Mellon Corp., however, and thus the Court must determine if
the Funds have properly alleged that BNY Mellon Corp. is a functional fiduciary. The Funds
first allege that “BNY Mellon Corp., through its division BNY Mellon Asset Servicing, actually
managed the [Funds’] investments.” First Am. Compl. ¶ 40. The Funds further support their
assertion that BNY Mellon Corp. is a fiduciary by tracking ERISA’s definition of “fiduciary,”
5

In their opening memorandum of law in support of their motion to dismiss, Defendants argued that
plaintiffs’ claims were time-barred. In reply, however, that argument was withdrawn. See Doc. 38 at 10
n.3. Thus, the Court will not address it here.

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alleging that both BNY Mellon Corp. and BNY “exercised authority or control over the
management or disposition of the assets of the Funds” and were fiduciaries “in their capacity as
investment manager of the Funds’ assets in the securities lending program,” where they
“managed, acquired, and disposed of the Funds’ assets.” Id. ¶¶ 43–44.
The determination of a defendant’s fiduciary status, particularly whether one is a
functional fiduciary, is typically premature at the motion to dismiss stage as it is a fact-intensive
inquiry. See, e.g., Krukowski v. Omicron Techs., Inc., No. 10 C 5282, 2011 WL 1303416, at *6
(N.D. Ill. Mar. 31, 2011); Patten v. N. Trust Co., 703 F. Supp. 2d 799, 808–09 (N.D. Ill. 2010);
George v. Kraft Foods Global, Inc., 674 F. Supp. 2d 1031, 1049–50 (N.D. Ill. 2009); Porterfield
v. Orecchio, No. 07 C 3654, 2008 WL 130921, at *3 (N.D. Ill. Jan. 9, 2008); Smith v. Aon Corp.,
No. 04 C 6875, 2006 WL 1006052, at *4 (N.D. Ill. Apr. 12, 2006). The Funds have sufficiently
alleged for pleading purposes that BNY Mellon Corp. acted as a fiduciary. See also Bd. of Trs.
of S. Cal. IBEW-NECA Defined Contribution Plan v. The Bank of New York Mellon Corp., No.
09 Civ. 6273(RMB), 2011 WL 6130831 (S.D.N.Y. Dec. 9, 2011) (summary judgment decision
involving similar claims against both BNY Mellon Corp. and BNY); N.C. Dep’t of State
Treasurer v. The Bank of New York Mellon, No. 12 CVS 3920, 2012 WL 5383312, at *3 (N.C.
Super. Ct. Oct. 31, 2012) (denying motion for judgment on the pleadings that BNY Mellon Corp.
was not proper party to litigation on similar basis). Because further factual development is
necessary to test the Funds’ allegations with respect to BNY Mellon Corp.’s status as a fiduciary,
the Court cannot conclude that BNY Mellon Corp. should be dismissed as a party at this stage. 6

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The Court has already found that the Funds have sufficiently alleged that BNY Mellon Corp. acted as a
functional fiduciary and thus need not address the Funds’ alternative argument raised in their response
that they should be allowed to explore whether BNY Mellon Corp. can be held liable on a veil piercing
theory. The Court notes, however, that such a theory is not viable as the complaint is currently pled.
Generally, in order for veil piercing to be appropriate, a parent corporation must exercise near complete
control over its subsidiary. Pa. Chiropractic Ass’n v. Blue Cross Blue Shield Ass’n, No. 09 C 5619, 2010

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II.

Breach of the Duties of Prudence and Loyalty
ERISA fiduciaries owe participants and beneficiaries a duty of loyalty. 29 U.S.C.

§ 1104(a)(1)(A). ERISA also requires fiduciaries to discharge their duties “with the care, skill,
prudence, and diligence under the circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims.” 29 U.S.C. § 1104(a)(1)(B). The ultimate loss that the Funds
realized on the Lehman Notes does not, on its own, establish that Defendants breached their duty
of care, for compliance with one’s fiduciary duty “requires prudence, not prescience.” DeBruyne
v. Equitable Life Assurance Soc’y of the U.S., 920 F.2d 457, 465 (7th Cir. 1990) (citation
omitted) (internal quotation marks omitted). Defendants argue that the Funds base their claims
of imprudence only on such hindsight allegations. But the Funds have in fact included
allegations based on information that was contemporaneously available to Defendants and the
public in 2007 and 2008, 7 contending that this information should have demonstrated that
holding onto the Lehman Notes was not prudent based on the changing circumstances. See
Armstrong v. LaSalle Bank Nat’l Ass’n, 446 F.3d 728, 734 (7th Cir. 2006) (“A trustee who
simply ignores changed circumstances that have increased the risk of loss to the trust’s
beneficiaries is imprudent.”).
WL 3940694, at *8 (N.D. Ill. Oct. 6, 2010). Although this is indeed a fact-intensive inquiry, Nat’l Soffit
& Escutcheons, Inc. v. Superior Sys., Inc., 98 F.3d 262, 265 (7th Cir. 1996), the Funds have not included
any allegations in the first amended complaint that would support such a finding. Absent further
amendment that would provide some basis for disregarding corporate form, the Funds’ claims against
BNY Mellon Corp. are restricted solely to a fiduciary theory. See Nathan v. Morgan Stanley Renewable
Dev. Fund, LLC, No. 11 C 2231, 2012 WL 1886440, at *8 (N.D. Ill. May 22, 2012) (dismissing parties on
motion to dismiss where plaintiffs’ complaint did not include “factual allegations relevant to the
determination of whether the court should disregard [the parent corporation’s] corporate form”); Pa.
Chiropractic Ass’n, 2010 WL 3940694, at *7–8 (finding that parent company could not be sued for
alleged wrongs of its subsidiary based on veil piercing theory but providing plaintiff leave to amend to
allege with more specificity the relationship between the parent and the subsidiary).
7
Although some of this information is based on information the Funds have learned from the examiner’s
report published in 2010, the information on which the Funds rely from that report is information that
they allege was available to Defendants in 2007 and 2008, not solely after the fact.

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Defendants nonetheless argue that the “red flags” and other warning signs that the Funds
have identified are insufficient to plausibly allege an imprudence claim, relying on the Second
Circuit’s recent decision in Pension Benefit Guaranty Corp. ex rel. St. Vincent Catholic Medical
Centers Retirement Plan v. Morgan Stanley Investment Management Inc., 712 F.3d 705 (2d Cir.
2013). Over a dissent, the majority in St. Vincent affirmed the dismissal of a pension plan
administrator’s breach of the duty of prudence claim, finding that the amended complaint did not
allege any surrounding circumstances that would make plausible the inference that the securities
at issue were no longer sound investments and “fail[ed] to connect the alleged ‘warning signs’ to
any specific characteristics of the securities” at issue. Id. at 721–22. The St. Vincent majority
acknowledged, however, that situations exist where an imprudence claim may survive a motion
to dismiss “based solely on circumstantial factual allegations” and that the inquiry must be
“context-specific.” Id. at 727. The dissent criticized the majority for adopting a “heightened
pleading standard” that “finds no support in the only guideposts that matter at the pleading stage:
Rule 8 and the standards articulated by the Supreme Court in Twombly and Iqbal,” contending
instead that plaintiffs had adequately pleaded their claim. Id. at 731–32, 734 (Straub, J.,
dissenting) (“Where, as here, plaintiffs have identified the actions which were allegedly
inappropriately risky, defendants are unquestionably on notice as to [the] basis of the claim at
issue. The rules of notice pleading require nothing more.”).
This Court agrees with the St. Vincent dissent that the majority there read Twombly and
Iqbal too strictly and declines to impose a heightened pleading requirement on plaintiffs
asserting ERISA imprudence claims, particularly where the Seventh Circuit has not adopted any
such requirement. Moreover, even the St. Vincent majority acknowledged that whether an
imprudence claim can proceed past a motion to dismiss is “context-specific” and noted that, in

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the case before it, “imprecise pleading is particularly inappropriate . . . where the plaintiffs
necessarily have access, without discovery, to plan documents and reports that provide specific
information from which to fashion a suitable complaint.” Id. at 723 (majority opinion). Here,
Defendants do not argue that the Funds have access to the additional information that the
plaintiffs in St. Vincent had so as to require more specific pleading from them. Thus, the Court
further finds St. Vincent’s heightened pleading expectations inappropriate here.
In addition to pointing to the decrease in the value of the Lehman Notes after Lehman
filed for bankruptcy, the Funds have detailed numerous warning signs that they allege should
have caused Defendants to reconsider whether it was prudent to retain the Lehman Notes given
the Funds’ particular investment objectives. 8 At this stage, these allegations give rise to the
plausible inference that Defendants breached their duty of prudence. “Whether plaintiffs can
establish that these warning signs would have caused a reasonably prudent fiduciary to act
differently than did defendants, or whether defendants are correct that plaintiffs are simply
relying on 20/20 hindsight, is a question of fact that might possibly (but not likely) be resolved
on summary judgment, but cannot be decided on a motion to dismiss.” La. Firefighters’ Ret.
Sys. v. N. Trust Invs., N.A., No. 09 C 7203, 2011 WL 1770266, at *4 (N.D. Ill. May 6, 2011); see
also Diebold ex rel. Exxon-Mobil Sav. Plan v. N. Trust Inv., N.A., No. 09 C 1934, 2010 WL
3700387, at *3 (N.D. Ill. Sept. 7, 2010) (“[W]hether a particular investment choice was
imprudent is a particularly fact-sensitive inquiry that would not be appropriate to resolve on a
motion to dismiss.”); IBEW, 2011 WL 6130831, at *1, 3 (denying summary judgment on
8

The Seventh Circuit has recognized that a fiduciary cannot be held liable for failure to use non-public
information available to it, as this “would require insiders to engage in investment transactions on the
basis of material nonpublic information, which would violate federal securities laws.” White v. Marshall
& Ilsley Corp., 714 F.3d 980, 992 (7th Cir. 2013). The Funds may not rely on any information that would
be considered insider information under the federal securities laws in their attempts to prove their breach
of fiduciary duty claims.

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imprudence claim based on allegation that Lehman Notes should have been sold prior to
Lehman’s bankruptcy). Additionally, because the Court finds that the Funds have properly
alleged an imprudence claim and Defendants argue only that the duty of loyalty claim should be
dismissed because it is derivative of the prudence claim, the Funds’ breach of the duty of loyalty
claim also survives.
III.

Violation of ERISA § 406
Section 406(b) prohibits a fiduciary from “deal[ing] with the assets of the plan in his own

interest or for his own account.” 29 U.S.C. § 1106(b)(1). The Funds have alleged that
Defendants violated this section because, by investing in the Lehman Notes, which were more
profitable for Defendants than other available and more suitable investments, they “placed their
own profit motives ahead of the security and safety of the Funds’ assets” and earned profits for
themselves at the Funds’ expense. First Am. Compl. ¶¶ 122–23. Defendants argue first that the
mere fact that the investments paid a higher return than other unidentified investments cannot
form the basis for a breach of § 406(b)(1), without citation to supporting case law. But at least
one other court has allowed a similar claim to proceed, see IBEW, 2011 WL 6130831, at *4–5,
and the Court does not find Defendants’ argument, without additional development, persuasive.
Although the Funds will be required to provide factual support for their allegations to sustain this
claim, they have sufficiently placed Defendants on notice of their claim.
Next, Defendants argue that the Funds’ § 406 claim fails because it is not based on any
actionable transaction. Defendants argue that the Funds are basing their claim on the absence of
a transaction—Defendants’ decision to retain the Lehman Notes rather than sell them. See David
v. Alphin, 704 F.3d 327, 340–41 (4th Cir. 2013) (claims under § 406 require an affirmative act,
such as the initial selection of funds, and cannot be based on “a decision to continue certain

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investments, or a defendant’s failure to act”). But the Court understands the Funds’ claim to be
that the initial selection of the Lehman Notes violated § 406 because that investment was more
profitable for Defendants than other available investments. As this is a cognizable transaction,
Defendants’ argument is rejected, and the Funds may proceed to discovery on their § 406 claim.
CONCLUSION
For the foregoing reasons, Defendants’ motion [26] is denied. Defendants are ordered to
answer the complaint by March 4, 2014. A status hearing is set for March 11, 2014 at 9:30 a.m.

Dated: February 6, 2014

SARA L. ELLIS
United States District Judge

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