McDonald v. Edward D. Jones & Co., L. P.

Filing 43

MEMORANDUM AND ORDER : IT IS HEREBY ORDERED that Defendants' motion to dismiss 26 is GRANTED in part and DENIED in part. The motion is granted as to Defendant The Jones Financial Companies, L.L.L.P. who is dismissed form this case. The motion is denied as to all other grounds. Signed by District Judge Rodney W. Sippel on 1/26/17. (LGK)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
CHARLENE F. MCDONALD, et al.,
Plaintiffs,
vs.
EDWARD D. JONES & CO., L.P., et al.,
Defendants.

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Case No. 4:16 CV 1346 RWS

MEMORANDUM AND ORDER
Plaintiff Charlene McDonald is a plan participant in Defendant Edward D.
Jones & Co. L.P.’s (Edward Jones) profit sharing and 401(k) plan (the Plan). Her
complaint asserts that Defendants breached their fiduciary duty and engaged in
prohibited transactions related to the Plan in violation of the Employee Retirement
Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. (ERISA). McDonald filed
this action on her own behalf, on behalf of a class of other persons similarly
situated, and on behalf of the Plan. Defendants have moved to dismiss
McDonald’s claims on a variety of grounds. I will deny Defendants’ motion in
part because McDonald’s complaint states viable claims. However, I will grant
Defendant The Jones Financial Companies, L.L.L.P.’s motion to dismiss because
the complaint fails to allege any facts which would establish that entity is a plan
fiduciary.

Legal Standard
When ruling on a motion to dismiss, I must accept as true all factual
allegations in the complaint and view them in light most favorable to the Plaintiff.
Fed. R. Civ. P. 12(b)(6); Erickson v. Pardus, 551 U.S. 89, 94 (2007). The purpose
of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) is to test the
legal sufficiency of the complaint. An action fails to state a claim upon which
relief can be granted if it does not plead “enough facts to state a claim to relief that
is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007). To survive a motion to dismiss, a plaintiff’s factual allegations “must be
enough to raise a right to relief above the speculative level. Id. at 555.
Discussion
Plaintiff Charlene McDonald is a plan participant in Defendant Edward
Jones profit sharing and 401(k) retirement plan. Edward Jones is the Plan
Administrator. Edward Jones is a subsidiary of Defendant The Jones Financial
Companies, L.L.L.P. (Jones Financial). Defendant Edward Jones Investment and
Education Committee selects Plan investments and educates Plan participants
about the Plan. Committee members include partners of Edward Jones as well as
officers and/or employees of Edward Jones.
When selecting investments for a retirement plan, ERISA requires plan
fiduciaries to discharge their duties with respect to the plan solely in the interest of
the participants and beneficiaries; act prudently; and defray reasonable plan
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administration expenses. 29 U.S.C. § 1104(a)(1).
McDonald alleges in her complaint that Defendants breached their fiduciary
duties imposed by ERISA regarding the Plan’s investment options. Specifically,
McDonald alleges that Edward Jones receives asset fees and sales fees from
“Preferred Product Partners” for many mutual funds it offers as investment options
in its Plan. In addition, McDonald alleges that Defendants breached their duties
because the Plan offers investment options which pay higher management fees for
some of the mutual funds than fees charged by identical mutual funds available to
the Plan. McDonald’s complaint specifically identifies several of these funds
including the American Funds Money Market Funds. McDonald also asserts that
Defendants breached their duties by paying recordkeeping fees for the Plan which
are excessive compared to available alternatives.
Plaintiff Charlene McDonald, as a Plan participant brings this suit under 29
U.S.C. § 1132(a)(2) to recover for the Plan the remedies provided under 29 U.S.C.
§ 1109(a). McDonald’s class allegations seek to certify a class of all participants
of the Plan during the relevant time period from August 19, 2010 to the date of the
judgment.
Defendants have moved to dismiss McDonald’s complaint on several
grounds. Defendants argue that the breach of fiduciary claims should be dismissed
because Defendants fulfilled their duties by offering an array of investment
options. McDonald’s complaint asserts that Defendants violated their fiduciary
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obligations and affiliated themselves with funds which benefited Defendants at the
expense of the Plan participants. Defendants’ defense that they offered an array of
investment options does not insulate Defendants from McDonald’s claims. See
Krueger v. Ameriprise Financial, Inc., 2012 WL 5873825 (D. Minn. Nov. 20,
2012).
Defendants argue that the complaint fails to state a claim for a breach of
fiduciary duties and for a failure to defray plan expenses. I find that the complaint,
when read as a whole, has provided sufficient facts to plausibly state these claims.
Defendants dispute the complaint’s factual allegations and argue that they acted
within ERISA”s standards. In deciding a motion to dismiss I must determine
whether the complaint states a claim for relief. Defendants’ arguments in support
of their motion to dismiss challenge the factual allegations of the complaint and are
premature at this stage of the litigation.
Defendants argue that McDonald does not have standing to challenge the
Defendants’ duties regarding the Plan funds in which she did not personally invest.
However, in addition to bringing claims on her own behalf, McDonald is seeking
relief on behalf of the Plan. In a suit brought pursuant to 29 U.S.C § 1132(a)(2), a
plan participant may seek recovery for the plan even where the participant did not
personally invest in every one of the funds that caused an injury to the plan.
Branden v. Wal-Mart Stores, Inc., 588 F.3d 585, 593 (8th Cir. 2009).
Defendants argue that McDonald’s breach of fiduciary duty claims are time
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barred. McDonald’s complaint alleges that Defendants breached their fiduciary
duties by making imprudent investments. Section 1113(2) of ERISA provides that
a limitations period to bring an action runs from three years after the earliest date
on which the plaintiff had actual knowledge of a breach of the statute. In her
complaint McDonald alleges that she did not discover the “substance of
deliberations, if any, of Defendants concerning the Plan’s menu of investment
options or selection of service providers during the Class Period” until shortly
before commencing the action. Doc. # 2, Amend. Compl. ¶ 15. For purposes of a
motion to dismiss a plaintiff’s factual allegations are deemed true. It appears from
the face of the complaint that this action was timely filed.
Finally, Defendants finally argue that Defendant Jones Financial, Edward
Jones parent, should be dismissed from this action because it was not a plan
fiduciary. See 29 U.S.C. § 1002(21)(A) (a person is a fiduciary with respect to a
plan to the extent he exercises any discretionary authority or discretionary control
respecting the management of the plan or exercises any authority or control
respecting the management or disposition of its assets). McDonald’s complaint
does not allege that Jones Financial was a plan fiduciary nor does it assert any facts
which would establish Jones Financial was a plan fiduciary. As a result, I will
grant the motion to dismiss as to Jones Financial.
Accordingly,

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IT IS HEREBY ORDERED that Defendants’ motion to dismiss [26] is
GRANTED in part and DENIED in part. The motion is granted as to Defendant
The Jones Financial Companies, L.L.L.P. who is dismissed form this case. The
motion is denied as to all other grounds.

___________________________________
RODNEY W. SIPPEL
UNITED STATES DISTRICT JUDGE
Dated this 26th day of January, 2017.

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