The City of Farmington Hills Employees Retirement System v. Wells Fargo Bank N.A.
Filing
439
MEMORANDUM OPINION AND ORDER. 1. Plaintiffs' Motion to File a Second Amended Complaint Pursuant to Rule 15 and to Add an Additional Class Representative Pursuant to Rule 23 of the Federal Rules of Civil Procedure (Doc. No. 387 ) is GRANTED IN PART and DENIED IN PART as follows: a. The Court hereby CERTIFIES a SUBCLASS of the ERISA plans that participated in Wells Fargo's securities lending program. The following entities shall be included in the subclass: (1) Twin City Hospital Worke rs Pension Fund; (2) The Schwan Food Company Retirement Savings Plan; (3) Longview Fibre Company; (4) ABC Retirement Plan for Cooperatives; (5) Alliant Energy Master Retirement Trust Plan; (6) Bemis Company, Inc. Master Pension Trust; (7) ITT Corpora tion Employee Benefits Trust; (8) ITT Corporation ISP for Salaried Employees; (9) Les Schwab Profit Sharing Retirement Trust; (10) MDU Resources Group Inc. Master Trust; (11) Omaha Construction Industry Plans; (12) Presbyterian Healthcare Services; (13) Presbyterian Healthcare Services Employees Pension Plan; (14) Smithfield Foods, Inc. Master Trust; (15) Arizona Laborers Teamsters Local 395 Pension Trust Fund; (16) Arizona Laborers Teamsters Local 395 Defined Contribution Fund; (17) Arizona State Carpenters Defined Contribution Fund; (18) Arizona State Carpenters Pension Trust Fund; (19) Construction Industry & Laborers Health & Welfare Trust; (20) Construction Industry & Laborers Pension Trust; (21) New Mexico Electricians' Retir ement Benefit Fund; (22) New Mexico Pipe Trades Health and Welfare Trust Fund; (23) New Mexico Pipe Trades Pension Fund Plan B; (24) Operating Engineers' Local 428 Defined Contribution Fund; (25) Operating Engineers' Local 428 Pension Fund; (26) Arizona Pipe Trades Defined Contribution Trust Fund; (27) Arizona Pipe Trades Pension Trust Fund; (28) Chicago Painters and Decorators Pension Plan; (29) Denver Area Meat Cutter and Employers Pension Plan; and (30) Rocky Mountain UFCW Unions & Employers Pension Plan. b. The following entities are hereby APPOINTED REPRESENTATIVES of the ERISA subclass: (1) The Board of Trustees of the Arizona State Carpenters Pension Trust Fund; and (2) The Arizona State Carpenters Defined Contribution Trus t Fund. c. The claims of the ERISA subclass in this action shall be limited to Count I of the Second Amended Complaint (Doc. No. 402 ): Breach of Fiduciary Duty. 2. Wells Fargo Bank, N.A.'s Motion for Reconsideration on Decertification of the Separately Managed Accounts (Doc. No. 417 ) is DENIED. (Written Opinion). Signed by Judge Donovan W. Frank on 1/14/2014. (BJS)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
The City of Farmington Hills
Employees Retirement System,
The Board of Trustees of the
Arizona State Carpenters Pension
Trust Fund, and The Arizona State
Carpenters Defined Contribution
Trust Fund, individually and on
behalf of all others similarly situated,
Civil No. 10-4372 (DWF/JJG)
Plaintiffs,
v.
MEMORANDUM
OPINION AND ORDER
Wells Fargo Bank, N.A.,
Defendant.
David M. Cialkowski, Esq., Carolyn G. Anderson, Esq., June Pineda Hoidal, Esq., and
Brian C. Gudmundson, Esq., Zimmerman Reed, P.L.L.P.; and Peter A. Binkow, Esq.,
Kara M. Wolke, Esq., Kevin Ruf, Esq., Leanne E. Heine, Esq., Casey E. Sadler, Esq.,
Elizabeth M. Gonsiovowski, Esq., Jill Duerler, Esq., and Robin Bronzaft Howald, Esq.,
Glancy Binkow & Goldberg LLP; and Thomas C. Michaud, Esq., Vanoverbeke, Michaud
& Timmony P.C.; and Christopher D. Kaye, Esq., E. Powell Miller, Esq., Jayson E.
Blake, Esq., and Sharon S. Almonrode, Esq., The Miller Law Firm, P.C., counsel for
Plaintiffs.
Bart H. Williams, Esq., Munger Tolles & Olson LLP; John N. Sellner, Esq., Justin H.
Jenkins, Esq., Brooks F. Poley, Esq., William A. McNab, Esq., Winthrop & Weinstine,
PA; Lawrence T. Hoffman, Esq., Richard M. Hagstrom, Esq., Rory D. Zamansky, Esq.,
Lindsey A. Davis, Esq., Daniel J. Millea, Esq., Michael R. Cashman, Esq., Zelle
Hofmann Voelbel & Mason LLP; and Manuel F. Cachan, Esq., Munger Tolles & Olson
LLP, counsel for Defendant.
INTRODUCTION
This matter is before the Court on Plaintiffs’ Motion to File a Second Amended
Complaint Pursuant to Rule 15 and to Add an Additional Class Representative Pursuant
to Rule 23 of the Federal Rules of Civil Procedure (Doc. No. 387) and Wells Fargo Bank,
N.A.’s Motion for Reconsideration on Decertification of the Separately Managed
Accounts (Doc. No. 417). For the reasons set forth below, the Court grants in part and
denies in part the motion to amend and denies the motion for reconsideration.
BACKGROUND
This case arises from the participation of the City of Farmington Hills Employees
Retirement System (“CFHERS”) and other similarly situated institutional investors
(together, “Plaintiffs”) in Wells Fargo Bank, N.A.’s (“Wells Fargo” or “Defendant”)
securities lending program (“SLP”). The factual background of this matter is laid out in
detail in the Court’s prior orders and is incorporated by reference herein. (See, e.g., Doc.
No. 386.)
On March 27, 2012, the Court granted Plaintiffs’ motion for class certification
with respect to the breach of fiduciary duty, breach of contract, and MCFA claims. (Doc.
No. 120 at 19.) On September 17, 2013, the Court granted in part and denied in part the
parties’ respective motions for summary judgment, and decertified the class with respect
to the ERISA Plaintiffs. (Doc. No. 386 at 32-34.) On October 11, 2013, the parties
agreed to the filing of a second amended complaint. (Doc. Nos. 399 & 400.) Plaintiffs
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filed their Second Amended Class Action Complaint and Jury Trial Demand (“Second
Amended Complaint”) the same day. (Doc. No. 402 (“Second Am. Compl.”).)
While the Second Amended Complaint includes the same six counts 1 as those
asserted by CFHERS in the First Amended Complaint (Doc. No. 277 (“Am. Compl.”)),
the Second Amended Complaint includes two additional class representatives: (1) the
Board of Trustees of the Arizona State Carpenters Pension Trust Fund; and (2) the
Arizona State Carpenters Defined Contribution Trust Fund (together, the “Arizona
Plaintiffs”). (Second Am. Compl. at 1.) All three named Plaintiffs assert their claims on
behalf of themselves and the class, and the Arizona Plaintiffs also assert their claims on
behalf of “all the ERISA entities that were decertified by the Court.” (Second Am.
Compl. ¶ 19.)
Plaintiffs now seek to amend their complaint and to add the Arizona Plaintiffs as
class representatives. Wells Fargo also moves for reconsideration of the Court’s
certification of the class to include those six Plaintiffs who invested in Wells Fargo’s
“separately managed” accounts.
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Plaintiffs assert the following six counts against Wells Fargo: (1) Breach of
Fiduciary Duty; (2) Breach of Contract; (3) Violation of Minnesota Prevention of
Consumer Fraud Act – Minn. Stat. § 325F.69 (“MCFA claim”); (4) Unlawful Trade
Practices – Minn. Stat. § 325D.13 (“UTPA claim”); (5) Deceptive Trade Practices –
Minn. Stat. § 325D.44 (“DTPA claim”); and (6) Civil Theft – Minn. Stat. § 604.14.
(Second Am. Compl. ¶¶ 51-89.)
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DISCUSSION
I.
Motion to Amend
Plaintiffs seek leave to file a second amended complaint and to include additional
class representatives. To the extent Plaintiffs have already filed their Second Amended
Complaint, Defendant does not object. (Doc. No. 402 (“Second Am. Compl.”); see Doc.
No. 409 at 1 n.1 (“As filed, Plaintiffs’ motion also sought permission to file a Second
Amended Complaint. . . . Wells Fargo did not oppose Plaintiffs’ filing of the Second
Amended Complaint and that complaint has already been filed with the Court.”).) 2 That
is, insofar as Plaintiffs seek leave to file an amended complaint, Defendant does not
oppose amendment, and the Second Amended Complaint has already been filed and
docketed in this matter. In that regard, the motion is moot. At the heart of Plaintiffs’
motion, however, is Plaintiffs’ request to add additional class representatives and,
therefore, to re-include the ERISA entities within the class. Defendant continues to
oppose the appointment of additional class representatives.
In its prior order granting, in part, Defendant’s motion for decertification, the
Court excluded the, then, sixteen ERISA Plaintiffs from the class. (Doc. No. 386
at 32-33.) At that time, however, the Court expressed no opinion “as to whether the
2
Plaintiffs’ Second Amended Complaint includes Count VI, a claim for civil theft
pursuant to Minn. Stat. § 604.14. (Second Am. Compl. ¶¶ 86-89.) The Court notes,
however, that it previously determined that Defendant was entitled to judgment with
respect to Count VI in its order on the parties’ motions for summary judgment. (Doc.
No. 386 at 25-27, 34.)
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ERISA Plaintiffs may be properly joined in this matter in the event Plaintiffs were to
further amend their complaint or add an additional class representative.” (Id. at 20.)
Plaintiffs have now taken such action and assert that the Arizona Plaintiffs are
appropriate class representatives pursuant to Rule 23 of the Federal Rules of Civil
Procedure.
Defendant disputes that the ERISA entities satisfy the numerosity requirement of
Rule 23(a)(1). Defendant contends that, even if they were sufficiently numerous, “the
only appropriate procedural approach would be to create a subclass of ERISA plans that
participated in Wells Fargo’s [SLP].” (Doc. No. 409 at 1.)
When a court considers the creation of a subclass, all four requirements of
Rule 23(a) must be satisfied for the proposed subclass. Roby v. St. Louis Sw. Ry. Co., 775
F.2d 959, 961 (8th Cir. 1985) (“[A]ll four requirements of Rule 23(a) must be met with
respect to each subclass in the class action.”). Rule 23(a)(1) requires that, in order for a
class member to sue on behalf of a class (or subclass) as a representative party, the class
(or subclass) must be “so numerous that joinder of all members is impracticable.” Fed.
R. Civ. P. 23(a)(1). Considerations relevant to assessing the impracticality of joinder of
all class (or subclass) members “include the number and geographical dispersion of
persons in the class, the nature of the action, the size of the individual claims, the
inconvenience of trying individual suits, and any other factor relevant to the
impracticability of joining the class members.” In re Select Comfort Corp. Sec. Litig.,
202 F.R.D. 598, 603 (D. Minn. 2001).
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Counsel on both sides agree that the total number of ERISA plans at issue is now
thirty. 3 (Doc. No. 403; Doc. No. 409 at 3.) While joinder of all ERISA entities in this
litigation may not be entirely impossible, given the advanced stage of the proceedings,
the geographical dispersion of the SLP investors, the inconvenience of separate actions,
and the particular nature and facts of this case (including the participation of all ERISA
and non-ERISA entities in the same SLP, and the substantial similarity of the ERISA and
non-ERISA breach of fiduciary duty claims at issue), the Court finds that the ERISA
entities would “suffer a strong litigational hardship or inconvenience if joinder [were]
required.” Carpe v. Aquila, Inc., 224 F.R.D. 454, 457 (W.D. Mo. 2004). Moreover, that
the ERISA SLP participants are thirty in number does not in and of itself defeat
numerosity. See Boyd v. Ozark Air Lines, Inc., 568 F.2d 50, 54 (8th Cir. 1977) (“No
arbitrary rules on the size of classes have been established by the courts and the question
of what constitutes impracticability depends upon the facts of each case.”); see, e.g., Ark.
3
In addition to the sixteen entities excluded from the class per the Court’s
September 17, 2013 Order (Doc. No. 386 at 32-33), the parties also agree that the
following fourteen entities are governed by ERISA: (1) Arizona State Carpenters
Defined Contribution Fund; (2) Arizona State Carpenters Pension Trust Fund;
(3) Construction Industry & Laborers Health & Welfare Trust; (4) Construction Industry
& Laborers Pension Trust; (5) New Mexico Electricians’ Retirement Benefit Fund;
(6) New Mexico Pipe Trades Health and Welfare Trust Fund; (7) New Mexico Pipe
Trades Pension Fund Plan B; (8) Operating Engineers’ Local 428 Defined Contribution
Fund; (9) Operating Engineers’ Local 428 Pension Fund; (10) Arizona Pipe Trades
Defined Contribution Trust Fund; (11) Arizona Pipe Trades Pension Trust Fund;
(12) Chicago Painters and Decorators Pension Plan; (13) Denver Area Meat Cutter and
Employers Pension Plan; and (14) Rocky Mountain UFCW Unions & Employers Pension
Plan. (Doc. No. 390, Sadler Decl. ¶ 4, Ex. A.)
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Educ. Ass’n v. Bd. of Educ. of Portland, Ark. Sch. Dist., 446 F.2d 763, 765-66 (8th Cir.
1971) (twenty-member class); Bublitz v. E.I. du Pont de Nemours & Co., 202 F.R.D. 251,
256 (S.D. Ia. 2001) (seventeen-member class). To require joinder under these
circumstances, and at this juncture, would be to elevate form over substance. 4
In light of the relevant considerations, the Court concludes that joinder is
impracticable in this class action and that the ERISA entities have satisfied the
numerosity requirement of Rule 23(a)(1). For the same reasons articulated in its prior
orders, and the additional reasons below, the Court further concludes that a subclass of
ERISA Plaintiffs would continue to satisfy the commonality, typicality, and adequacy of
representation provisions of Rule 23.
With respect to commonality and typicality, Defendant contends that, because
Sections 502(a) and 514(a) of ERISA preempt the certified state law claims, the Arizona
Plaintiffs “do not possess claims for breach of contract, breach of common law fiduciary
duties, or violations of the [MCFA].” (Doc. No. 409 at 4.) The Court acknowledges that
the Arizona Plaintiffs are not appropriate class representatives for any state law claims
that are preempted by ERISA. See Aetna Health Inc. v. Davila, 542 U.S. 200, 209 (2004)
(“[A]ny state-law cause of action that duplicates, supplements, or supplants, the ERISA
civil enforcement remedy conflicts with the clear congressional intent to make the ERISA
4
This case commenced more than three years ago, and the class claims were
certified almost two years ago. The ERISA entities received class notice, and it appears
that, until the Court’s September 17, 2013 Order (Doc. No. 386), the thirty ERISA
investors had been involved in this litigation as members of the class.
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remedy exclusive and is therefore pre-empted.”); Wilmington Shipping Co. v.
New England Life Ins. Co., 496 F.3d 326, 341 (4th Cir. 2007) (“ERISA’s preemptive
scope is not limited to ‘state laws specifically designed to affect employee benefit
plans.’ . . . Nor may parties avoid ERISA’s preemptive reach by recasting otherwise
preempted claims as state-law contract and tort claims.”). Nevertheless, the Court
concludes that any differences between the claims of the ERISA entities and the certified
class claims is best resolved through the creation of a subclass of ERISA Plaintiffs,
whose breach of fiduciary duty claim under ERISA may be properly asserted by the
Arizona Plaintiffs. See Fed. R. Civ. P. 23(c)(5) (“When appropriate, a class may be
divided into subclasses that are each treated as a class under this rule.”).
Therefore, the Court appoints the Arizona Plaintiffs as class representatives for the
thirty ERISA entities at issue, which will be re-included in this action; the ERISA
Plaintiffs shall form a subclass of the certified class in this matter in order to assert their
breach of fiduciary duty claim under ERISA. The Court concludes that amendment is
futile with respect to Counts II through VI of the Second Amended Complaint insofar as
the ERISA entities may seek to advance such claims. As such, the claims of the ERISA
subclass in this action shall be limited to Count I: breach of fiduciary duty.
II.
Request for Reconsideration
Also before the Court is Wells Fargo’s Motion for Reconsideration on
Decertification of the Separately Managed Accounts (Doc. No. 417).
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Local Rule 7.1(j) requires that a party seeking permission to file a motion for
reconsideration must “show compelling circumstances to obtain such permission.”
D. Minn. LR 7.1(j). On October 15, 2013, after having reviewed the letters of the parties,
the Court granted Defendant’s request for permission to file a motion for clarification
and/or reconsideration. (Doc. No. 405.) The Court, however, explicitly noted that, in
granting the request, “the Court [did] not concede that Defendant ha[d] shown
compelling circumstances sufficient to justify a motion for reconsideration.” (Id.)
In its motion, Defendant challenges the Court’s certification of the class for the
third time. While Defendant directs its request for reconsideration at the six “separately
managed” accounts, 5 Defendant once again alleges that evidence related to the Business
Trust is entirely irrelevant to those six class members, who did not invest in the Business
Trust.
As the Court previously concluded in its class certification order, each of the
certified claims in this case “can be proven on a class-wide basis through the use of
generalized evidence.” (See generally Doc. No. 120.) While Defendant concedes that
the claims brought by the separately managed account investors “are subject to some
common proof—principally the ‘prime considerations’ language of the Securities
5
Defendant seeks to exclude the following six entities from the class: (1) D.B.
Reinhart Marital Trust (including the Gateway Development Trust, Marjorie A. Reinhart
2001 Trust, and Marjorie A. Reinhart Revocable Trust); (2) Sirius Finance, LLC;
(3) Thomas H. Bailey; (4) the Wells Fargo Advantage Funds; (5) the Wells Fargo
Collective Funds; and (6) the Wells Fargo Diversified Investment Funds for Personal
Trust. (Doc. No. 417 at 2; Doc. No. 419 at 5 n.2.)
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Lending Agreements [SLAs],” Defendant maintains that “claims against Wells Fargo
related to investments in the Business Trust” are supported by additional evidence that “is
inapplicable to claims by the six separately managed account class members.” (Doc.
No. 419 at 7-8.) To the extent Defendant challenges the introduction of evidence at trial
pertaining to the Business Trust, including the Declaration of Trust, or arguments related
thereto, with respect to the separately managed accounts, such challenges are premature
at this time. Importantly, Defendant acknowledges that the SLAs for both the Business
Trust and separately managed accounts contain the same “prime considerations
language” (safety of principal and liquidity requirements) and admits that “some common
proof” exists for the claims of all class members. The Court will not speculate as to how
Plaintiffs will prove up their case at this time. Any evidentiary challenges related to the
trial of this matter are more properly raised as motions in limine, and the Court reserves
the right to limit the scope of argument and testimony as it sees fit at a later date. To the
extent Defendant’s challenge goes to the adequacy of class counsel in its representation
of both Business Trust and non-Business Trust investors as part of this class action, any
perceived conflict is speculative at best. At its core, this case presents a challenge to the
administration of Wells Fargo’s SLP as a whole; Plaintiffs’ central dispute is that
Wells Fargo failed to adhere to the safety of principal and liquidity requirements of the
substantially similar SLAs that governed Wells Fargo’s relationships with each of the
class member investors. (See, e.g., Second Am. Compl. ¶¶ 5, 12, 13, 62.) Defendant has
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not demonstrated that the six separately managed, non-Business Trust investors must be
excluded from the class.
Having fully considered the submissions of the parties and arguments of counsel,
the Court concludes that Defendant has failed to demonstrate compelling circumstances
sufficient to justify modification of this Court’s previous orders. The Court thus denies
Defendant’s motion for reconsideration.
ORDER
Based upon the foregoing, and the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1.
Plaintiffs’ Motion to File a Second Amended Complaint Pursuant to
Rule 15 and to Add an Additional Class Representative Pursuant to Rule 23 of the
Federal Rules of Civil Procedure (Doc. No. [387]) is GRANTED IN PART and
DENIED IN PART as follows:
a.
The Court hereby CERTIFIES a SUBCLASS of the ERISA
plans that participated in Wells Fargo’s securities lending program. The
following entities shall be included in the subclass: (1) Twin City Hospital
Workers Pension Fund; (2) The Schwan Food Company Retirement
Savings Plan; (3) Longview Fibre Company; (4) ABC Retirement Plan for
Cooperatives; (5) Alliant Energy Master Retirement Trust Plan; (6) Bemis
Company, Inc. Master Pension Trust; (7) ITT Corporation – Employee
Benefits Trust; (8) ITT Corporation – ISP for Salaried Employees; (9) Les
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Schwab Profit Sharing Retirement Trust; (10) MDU Resources Group Inc.
Master Trust; (11) Omaha Construction Industry Plans; (12) Presbyterian
Healthcare Services; (13) Presbyterian Healthcare Services Employees
Pension Plan; (14) Smithfield Foods, Inc. Master Trust; (15) Arizona
Laborers Teamsters Local 395 – Pension Trust Fund; (16) Arizona
Laborers Teamsters Local 395 – Defined Contribution Fund; (17) Arizona
State Carpenters Defined Contribution Fund; (18) Arizona State Carpenters
Pension Trust Fund; (19) Construction Industry & Laborers Health &
Welfare Trust; (20) Construction Industry & Laborers Pension Trust;
(21) New Mexico Electricians’ Retirement Benefit Fund; (22) New Mexico
Pipe Trades Health and Welfare Trust Fund; (23) New Mexico Pipe Trades
Pension Fund Plan B; (24) Operating Engineers’ Local 428 Defined
Contribution Fund; (25) Operating Engineers’ Local 428 Pension Fund;
(26) Arizona Pipe Trades Defined Contribution Trust Fund; (27) Arizona
Pipe Trades Pension Trust Fund; (28) Chicago Painters and Decorators
Pension Plan; (29) Denver Area Meat Cutter and Employers Pension Plan;
and (30) Rocky Mountain UFCW Unions & Employers Pension Plan.
b.
The following entities are hereby APPOINTED
REPRESENTATIVES of the ERISA subclass: (1) The Board of Trustees
of the Arizona State Carpenters Pension Trust Fund; and (2) The Arizona
State Carpenters Defined Contribution Trust Fund.
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c.
The claims of the ERISA subclass in this action shall be
limited to Count I of the Second Amended Complaint (Doc. No. [402]):
Breach of Fiduciary Duty.
2.
Wells Fargo Bank, N.A.’s Motion for Reconsideration on Decertification of
the Separately Managed Accounts (Doc. No. [417]) is DENIED.
Dated: January 14, 2014
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
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