CARR

Filing 80

ORDERED that Ds'# 40 Motion to dismiss is GRANTED IN PART and DENIED IN PART (as specified, see pdf order for specifics ). FURTHER ORDERED that Ds' # 44 Motion for summary judgment is DENIED. IT IS HEREBY FURTHER ORDERED that D IGT Profit Sharing Committee's # 46 Alternative motion for summary judgment is DENIED. IT IS HEREBY FURTHER ORDERED that Ps shall properly serve D IGT Profit Sharing Committee by 4/6/2011. Signed by Judge Edward C. Reed, Jr on 3/16/2011. (Copies have been distributed pursuant to the NEF - DRM)

In re: Int;' Game Tech, ERISA Litigation

Doc. 80

1 2 3 4

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA RENO, NEVADA

CHRISTOPHER CARR, ROXANNE CLAYTON, AND 5 BRIAN BENNETT, 6 7 vs. 8 INTERNATIONAL GAME TECHNOLOGY et al., 9 Defendants. 10 ___________________________________ 11 RANDOLPH K. JORDAN and KIMBERLY J. JORDAN, 12 Plaintiffs, 13 vs. 14 INTERNATIONAL GAME TECHNOLOGY, 15 et al., 16 17 18 Defendants. ___________________________________ Plaintiffs,

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

3:09-CV-0584-ECR-RAM (Base Case)

Order

3:09-CV-0585-ECR-RAM (Member Case)

Plaintiffs are former employee participants in International

19 Game Technology's ("IGT") profit sharing plan ("Plan") who have 20 brought a class action suit under Federal Rule of Civil Procedure 23 21 to allege breach of fiduciary duty claims under Section 502(a) of 22 the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 23 U.S.C. § 1132(a)(2). The parties have argued the merits of the

24 motions to be considered by the Court at the hearing on March 10, 25 2011. The Court has read and considered the moving, opposition and Now

26 reply documents, along with the parties' supplemental briefs. 27 pending are a motion to dismiss (#40) filed by Defendants IGT,

28 Siciliano and the members of IGT's Board of Directors (the "Director

Dockets.Justia.com

1 Defendants"); a motion for summary judgment (#44) filed by 2 Defendants IGT, Siciliano and the Director Defendants; and an 3 alternative motion to dismiss (#46) filed by Defendant IGT Profit 4 Sharing Committee. 5 6 7 8 A. The Plan The Plan is a voluntary defined contribution plan whereby I. Factual Background The motions are ripe, and we now rule on them.

9 participants make contributions to the Plan and direct the Plan to 10 purchase investments with those contributions from options pre11 selected by Defendants, which are then allocated to participants' 12 individual accounts. (Am. Compl. ¶¶ 57-58 (#36).) As of June 26,

13 2008, Plan participants could direct their accounts to be invested 14 in one or more of IGT Stock and twenty-six (26) mutual funds offered 15 by the Plan as investment options. (Id. ¶ 59.) Contributions are

16 held by a Trustee and placed in the Plan's Trust Fund. (D's Memo. at 17 9 (#41).) Fidelity Management Trust Company serves as the Trustee IGT delegated responsibility

18 of the Plan. (Am. Compl. ¶ 62. (#36).)

19 for administration of the Plan to a committee (the "Committee"), 20 whose members are subject to appointment or approval by IGT's Board 21 of Directors (the "Board"). (Id. ¶ 2.) 22 fiduciary for the Plan. (Id. ¶ 38.) 23 The parties disagree as to whether the terms of the Plan The Committee is the named

24 mandate that IGT stock be offered as an investment option. (Id. ¶ 25 64; D's Memo. at 10 (#41).) Section 3.8(a) of the Plan provides

26 that the "Committee may, in its discretion, terminate any Investment 27 Fund," while Section 3.8(b) of the Plan states that "[o]ne of the 28
2

1 Investment Funds available shall be the IGT Stock Fund . . . ." 2 (#36-2 at 43-44.) 3 4 B. IGT Stock Price Decreases As of the end of Plan year 2007, Plaintiffs assert that the

5 Plan held approximately 2,370,954 shares of IGT stock, valued at a 6 market price of over $104,156,009. (Am. Compl. ¶67.) By the end of

7 Plan year 2008, the amount of shares of IGT stock held by the Plan 8 increased to 2,878,778, while the market value of such shares 9 decreased to $34,228,670, representing a decrease of 67%. (Id.) 10 Plaintiffs define the "Class Period" as November 1, 2007 Plaintiffs allege that during the Class

11 April 23, 2009. (Id. ¶ 3.)

12 Period, Defendants either were or should have been aware that IGT's 13 stock was artificially inflated as a result of inaccurate public 14 statements by IGT. 15 16 17 II. Procedural Background On October 2, 2009, individual Plaintiffs Roxanne Clayton,

18 Brian Bennett and Christopher Carr filed a "Class Action Complaint 19 for Violations of the Employee Retirement Income Security Act" (#1) 20 against Defendants. Summons was issued as to Defendants on October

21 5, 2009 (#3), and a Waiver of Service by each Defendant was filed on 22 November 20, 2009 (##10-20). On February 8, 2010, the Court issued

23 an order (#33) consolidating all related actions and appointing 24 Plaintiffs Randolph K. Jordan, Kimberly J. Jordan, Christopher Carr, 25 Roxanne Clayton and Brian Bennett as interim lead Plaintiffs. On

26 March 10, 2010, Plaintiffs filed an amended complaint "Consolidated 27 28
3

1 Class Action Complaint for Violations of the Employee Retirement 2 Income Security Act" (#36). 3 On April 9, 2010, individual Defendants and Defendant IGT filed

4 a "Motion to Dismiss Consolidated Class Action Complaint and Request 5 for Hearing" (#40) (the "First MTD") and accompanying memorandum 6 (#41), and on May 10, 2010, Plaintiffs filed their response (#54) to 7 such motion. 8 Defendants filed their reply (#65) on June 8, 2010.

Also on April 9, 2010, individual Defendants and Defendant IGT

9 filed an "Alternative Motion by Defendants for Summary Judgment on 10 Claims of Named Plaintiffs" (#44) (the "MSJ"), and on April 30, 11 2010, Plaintiffs filed their response (#49) to such motion. 12 Defendants filed their reply (#64) on May 14, 2010. 13 In addition, on April 9, 2010, Defendant IGT Profit Sharing

14 Committee filed "Defendant IGT Profit Sharing Plan Committee's 15 Alternative Motion to Dismiss" (#46) (the "Alternative MTD"), and on 16 May 10, 2010, Plaintiffs filed their response (#55) to such motion. 17 18 19 III. Motion to Dismiss Standard Courts engage in a two-step analysis in ruling on a motion to

20 dismiss. Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009); Bell Atlantic 21 Corp. v. Twombly, 550 U.S. 544 (2007). First, courts accept only

22 non-conclusory allegations as true. Iqbal, 129 S. Ct. at 1949. 23 "Threadbare recitals of the elements of a cause of action, supported 24 by mere conclusory statements, do not suffice." Id. (citing Twombly, 25 550 U.S. at 555). Federal Rule of Civil Procedure 8 "demands more

26 than an unadorned, the-defendant-unlawfully-harmed-me accusation." 27 Id. 28 Federal Rule of Civil Procedure 8 "does not unlock the doors of
4

1 discovery for a plaintiff armed with nothing more than conclusions." 2 Id. at 1950. The Court must draw all reasonable inferences in favor

3 of the plaintiff. See Mohamed v. Jeppesen Dataplan, Inc., 579 F.3d 4 943, 949 (9th Cir. 2009). 5 After accepting as true all non-conclusory allegations and

6 drawing all reasonable inferences in favor of the plaintiff, the 7 Court must then determine whether the complaint "states a plausible 8 claim for relief." Iqbal, 129 S. Ct. at 1949. (citing Twombly, 550 9 U.S. at 555). "A claim has facial plausibility when the plaintiff

10 pleads factual content that allows the court to draw the reasonable 11 inference that the defendant is liable for the misconduct alleged." 12 Id. at 1949 (citing Twombly, 550 U.S. at 556). This plausibility

13 standard "is not akin to a `probability requirement,' but it asks 14 for more than a sheer possibility that a defendant has acted 15 unlawfully." Id. A complaint that "pleads facts that are `merely

16 consistent with' a defendant's liability...'stops short of the line 17 between possibility and plausibility of `entitlement to relief.'" 18 Id. (citing Twombly, 550 U.S. at 557). 19 20 21 IV. Summary Judgment Standard Summary judgment allows courts to avoid unnecessary trials N.W. Motorcycle Ass'n v. The court

22 where no material factual dispute exists.

23 U.S. Dep't of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994).

24 must view the evidence and the inferences arising therefrom in the 25 light most favorable to the nonmoving party, Bagdadi v. Nazar, 84 26 F.3d 1194, 1197 (9th Cir. 1996), and should award summary judgment 27 where no genuine issues of material fact remain in dispute and the 28
5

1 moving party is entitled to judgment as a matter of law. 2 CIV. P. 56(c).

FED. R.

Judgment as a matter of law is appropriate where

3 there is no legally sufficient evidentiary basis for a reasonable 4 jury to find for the nonmoving party. FED. R. CIV. P. 50(a). Where

5 reasonable minds could differ on the material facts at issue, 6 however, summary judgment should not be granted. See Warren v. City

7 of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995), cert. denied, 116 8 S.Ct. 1261 (1996). 9 The moving party bears the burden of informing the court of the

10 basis for its motion, together with evidence demonstrating the 11 absence of any genuine issue of material fact. 12 Catrett, 477 U.S. 317, 323 (1986). Celotex Corp. v.

Once the moving party has met

13 its burden, the party opposing the motion may not rest upon mere 14 allegations or denials in the pleadings, but must set forth specific 15 facts showing that there exists a genuine issue for trial. 16 v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Anderson

Although the

17 parties may submit evidence in an inadmissible form -- namely, 18 depositions, admissions, interrogatory answers, and affidavits -- 19 only evidence which might be admissible at trial may be considered 20 by a trial court in ruling on a motion for summary judgment. FED.

21 R. CIV. P. 56(c); Beyene v. Coleman Sec. Servs., Inc., 854 F.2d 22 1179, 1181 (9th Cir. 1988). 23 In deciding whether to grant summary judgment, a court must

24 take three necessary steps: (1) it must determine whether a fact is 25 material; (2) it must determine whether there exists a genuine issue 26 for the trier of fact, as determined by the documents submitted to 27 the court; and (3) it must consider that evidence in light of the 28
6

1 appropriate standard of proof.

Celotex, 477 U.S. at 317.

Summary

2 judgment is not proper if material factual issues exist for trial. 3 B.C. v. Plumas Unified Sch. Dist., 192 F.3d 1260, 1264 (9th Cir. 4 1999). "As to materiality...only disputes over facts that might

5 affect the outcome of the suit under the governing law will properly 6 preclude the entry of summary judgment." Anderson, 477 U.S. at 248.

7 Disputes over irrelevant or unnecessary facts should not be 8 considered. Id. Where there is a complete failure of proof on an

9 essential element of the nonmoving party's case, all other facts 10 become immaterial, and the moving party is entitled to judgment as a 11 matter of law. Celotex, 477 U.S. at 323. Summary judgment is not a

12 disfavored procedural shortcut, but rather an integral part of the 13 federal rules as a whole. 14 15 16 17 V. Discussion A. Defendants' Motion to Dismiss (#40) The First MTD moves to dismiss the amended complaint (#36) on Id.

18 the grounds that the allegations fail to state a claim under ERISA. 19 Specifically, Defendants make four claims in their accompanying 20 memorandum (#41): (i) Plaintiffs' prudence claim fails as a matter 21 of law; (ii) Plaintiffs do not state a claim based on false and 22 misleading statements; (iii) Plaintiffs do not state a claim for 23 failure to monitor; and (iv) Plaintiffs do not state a claim for co24 fiduciary liability. 25 26 27 28
7

i. Defendants' Fiduciary Status

1

Defendants allege that neither IGT, the Board, nor Defendant

2 Siciliano exercised a fiduciary function with respect to the Plan's 3 investment in IGT stock. 4 We find that the members of the Board were de facto fiduciaries

5 with respect to the Board's authority to appoint, retain or remove 6 members of the Committee; that Mr. Siciliano was not a fiduciary 7 with respect to the Plan; that the Committee was a named and a de 8 facto fiduciary with respect to the Plan; and that IGT was a de 9 facto fiduciary with respect to (i) its communications regarding the 10 Plan and (ii) its authority to appoint and remove the Plan Trustee.1 11 ERISA expressly limits liability for fiduciary breach to ERISA

12 fiduciaries. Wright v. Or. Metallurgical Corp., 360 F.3d 1090, 1102 13 (9th Cir. 2004); Gelardi v. Pertec Computer Corp., 761 F.2d 1323, 14 1324-25 (9th Cir. 1985). To qualify as an ERISA fiduciary, an

15 individual or entity must either (i) be named or designated as a 16 fiduciary under the terms of an ERISA plan pursuant to 29 U.S.C. § 17 1102(a); or (ii) act as a "functional" or "de facto" fiduciary with 18 respect to an ERISA plan by exercising discretionary control over 19 the management or administration of the plan or its assets pursuant 20 to 29 U.S.C. § 1002(21)(A). ERISA fiduciaries may be held liable as

21 such only "to the extent" that they exercise discretionary control 22 over the management or administration of a plan or its assets. See 23 29 U.S.C. § 1002(21)(A); Pegram v. Herdrich, 530 U.S. 211, 225-26 24 (2000). The question of whether a person qualifies as a functional

25 or de facto fiduciary under ERISA "is fact intensive and the court 26
1

27 28

The Plan Trustee was a named fiduciary with respect to the
8

Plan.

1 must accept well-pled allegations as true when ruling on a motion to 2 dismiss." In re Xerox Corp. ERISA Litig., 483 F. Supp. 2d 206, 213 3 (2007). A defendant's fiduciary status under ERISA may be decided on 4 a motion to dismiss. See Wright, 360 F.3d at 1101-02. 5 6 a. IGT Plaintiffs contend that Defendant IGT was both a named and de

7 facto fiduciary of the Plan (i) by acting through the Committee to 8 disseminate information regarding the Plan; (ii) by virtue of its 9 ability to appoint, monitor and remove the Trustee of the Plan; and 10 (iii) through the acts of its employees who performed fiduciary 11 functions with respect to the Plan under the doctrine of respondeat 12 superior. (Am. Compl. ¶¶ 76-80 (#36).) 13 14 Acting through the Committee ERISA requires that the plan administrator furnish each

15 participant covered under the plan and each beneficiary under the 16 plan with a summary plan description. 29 U.S.C. § 1101(a)(1). 17 Plaintiffs allege that IGT exercised responsibility through the 18 Committee for communicating with participants regarding the Plan as 19 required by ERISA. (Am. Compl. ¶ 76 (#36).) Plaintiffs assert that

20 IGT and the Committee disseminated the Plan's documents and related 21 materials, which incorporated by reference materials such as IGT's 22 inaccurate Securities and Exchange Commission ("SEC") filings, which 23 converted such materials into fiduciary communications. (Id. ¶¶ 76, 24 87.) Plaintiffs further allege that IGT made misleading

25 communications to Plan participants through press releases and other 26 communications with analysts and the press. (Id. ¶¶ 91-97, 103-106, 27 108-114, 119-121, 135-137, 143.) 28
9

1

Defendants correctly state that, in general, SEC filings are

2 made in defendants' corporate, rather than fiduciary, capacity. See, 3 e.g., Harris v. Amgen, 2010 U.S. Dist. LEXIS 26283 at *41 (C.D. Cal. 4 Mar. 2, 2010); In re Citigroup ERISA Litig., 2009 U.S. Dist. LEXIS 5 78055 at *72 (S.D.N.Y. Aug. 31, 2009). In Citigroup, for example,

6 the Court found that the defendants alleged to have made false 7 statements on the SEC filings were not ERISA fiduciaries subject to 8 a duty to communicate truthfully with plan participants. Likewise,

9 Defendants rely on Quan for the proposition that SEC filings are 10 made in a defendant's corporate capacity even when incorporated into 11 plan documents. 12 Cir. 2010) Quan v. Computer Scis. Corp., 623 F.3d 870 (9th The Quan court merely held that plaintiffs

We disagree.

13 in that case "had not generated any genuine issues of material fact 14 that the alleged misrepresentations and nondisclosures at issue were 15 material," and did not hold that SEC filings are not fiduciary 16 communications when incorporated into plan documents by ERISA 17 fiduciaries. Id. at 877. 18 The United States Supreme Court, however, has held that ERISA

19 liability may be implicated if a defendant intentionally connects 20 its statements about the company's financial health to statements it 21 makes about the future of plan benefits. See Varity v. Howe, 516 22 U.S. 489, 504 (1996). This indicates that those who prepare and

23 sign SEC filings do not become ERISA fiduciaries through those acts. 24 The Ninth Circuit Court of Appeals has recognized, however, that

25 the act of incorporating SEC filings into plan communications may 26 give rise to ERISA liability. Quan, 623 F.3d at 886 (9th Cir. 2010) 27 ("We assume, without deciding, that alleged misrepresentations in 28
10

1 SEC disclosures that were incorporated into communications about an 2 ERISA plan are `fiduciary communications' on which an ERISA 3 misrepresentation claim can be based."). See also In re Computer 4 Scis. Corp. ERISA Litig., 635 F. Supp. 2d 1128, 1140-1141 (C.D. Cal. 5 2009). 6 Here, the Plan's Prospectus and Summary Plan Description, dated

7 October 13, 2000 ("SPD") lists IGT as the Plan sponsor and 8 administrator, and notes that IGT has delegated responsibility for 9 Plan administration to the Committee. (Am. Compl. ¶ 2 (#36).) The

10 SPD incorporates IGT's SEC filings by reference, and specifically, 11 those filed after the date of the SPD. (Id. ¶ 66.) As such, we find

12 that Plaintiffs have alleged facts sufficient to establish, at the 13 pleadings stage, that IGT is a de facto fiduciary under ERISA with 14 respect to communications regarding the Plan. 15 16 Ability to Appoint, Monitor and Remove Case law under ERISA indicates that the power to appoint and

17 remove an ERISA fiduciary gives rise to a duty to monitor and 18 results in the appointing and removing party being a de facto 19 fiduciary with respect to such appointment, monitoring and removal. 20 See, e.g., In re Elec. Data Sys. Corp. "ERISA" Litig., 305 F. Supp. 21 2d 658, 670 (E.D. Tex. 2004). 22 As such, IGT is a de facto fiduciary with respect to the

23 appointment, monitoring and removal of the Trustee of the Plan. 24 However, Plaintiffs do not allege that IGT breached its fiduciary 25 duty in selecting, retaining or monitoring the Trustee. 26 Therefore, this is not a basis on which the Court will find

27 that IGT is a fiduciary. 28
11

1 2

Respondeat Superior For purposes of ERISA, "an employer may wear `two hats' as both In re Morgan Stanley

3 a corporate employer and a plan fiduciary."

4 ERISA Litig., 696 F. Supp. 2d 345, 355 (quoting Amato v. Western 5 Union Intern., Inc., 773 F.2d 1402, 1416 (2d Cir. 1985)). However,

6 an employer is not immediately considered a plan fiduciary merely 7 because one or more of its employees function as such. Id. See also 8 In re Williams Cos. ERISA Litig., 271 F. Supp. 2d 1328, 1338 (N.D. 9 Okla. 2003). Here, fiduciary responsibility on the part of IGT

10 based on a respondeat superior theory is not established. In re 11 Morgan Stanley ERISA Litig., 696 F. Supp. 2d at 355-356. The Ninth

12 Circuit has found that a theory of respondeat superior in ERISA 13 cases is inconsistent with the core principle of ERISA that 14 "employees will serve on fiduciary committees but [that] the statute 15 imposes liability on the employer only when and to the extent that 16 the employer [itself] exercises the fiduciary responsibility 17 allegedly breached." Gelardi, 761 F.2d at 1325. See also Tool v. 18 Nat. Employee Benefit Servs., Inc., 957 F. Supp. 1114, 1121 (N.D. 19 Cal. 1996). 20 21 b. Members of the Board Plaintiffs assert that the Director Defendants are de facto

22 fiduciaries on the grounds that (i) the Director Defendants 23 exercised discretionary authority with respect to the appointment of 24 the Plan fiduciaries, as the Board had the power under the Plan to 25 appoint, retain or remove members of the Committee (Am. Compl. ¶¶ 26 25-34, 36, 37); and (ii) the Plan provides that the Committee should 27 keep the Board apprised of the investment results of the Plan and 28
12

1 report any other information necessary to fully inform the Board of 2 the status and operation of the Plan (Id. ¶ 37). 3 For purposes of ERISA, directors are only fiduciaries to the IT Corp. v.

4 extent that they perform the functions of a fiduciary.

5 Gen. Am. Life Ins. Co., 107 F.3d 1415, 1419 (9th Cir. 1997) ("Only 6 persons who perform one or more of the functions described in 7 section 3(21)(A) of the Act with respect to an employee benefit plan 8 are fiduciaries"); 29 C.F.R. § 2509.75-8, D-4 ("Members of the board 9 of directors of an employer which maintains an employee benefit plan 10 will be fiduciaries only to the extent that they have responsibility 11 for the functions described in section 3(21)(A) of the Act"). 12 We are persuaded that where a corporation's board of directors

13 is charged with reviewing and evaluating reports from a committee 14 charged with administering an ERISA plan, such powers of general 15 oversight are insufficient to establish the board's fiduciary 16 status, even when coupled with other powers, such as that to modify 17 the plan and to decide whether to make matching contributions under 18 the plan. In re Uniphase Corp. ERISA Litig., 2005 U.S. Dist. LEXIS 19 17503 at *10 (N.D. Cal. July 13, 2005). Possession of such powers

20 of general oversight is insufficient to establish that the board 21 exercises discretionary authority over the management of the plan. 22 Rather, the directors of a company are only fiduciaries for ERISA 23 purposes to the extent that they exercise discretionary authority 24 with respect to the particular activity at issue. 25 Where a board of directors has a power to appoint, retain or

26 remove members of a committee acting as named fiduciary under a 27 plan, such power will give rise to a duty to monitor that committee 28
13

1 under ERISA. See, e.g., In re Computer Scis. Corp. Erisa Litig., 635 2 F. Supp. 2d 1128, 1144 (C.D. Cal. 2009). The board of directors'

3 obligations can extend only to this duty to monitor and not to acts 4 such as controlling investment options or communicating with plan 5 participants. Crowley v. Corning, Inc., 234 F. Supp. 2d 222 Here, the parties do not contest that the Board

6 (W.D.N.Y. 2002).

7 had the authority to appoint, retain or remove members of the 8 Committee. As discussed above, this authority will give rise to a

9 duty to monitor the members of the Committee. 10 Therefore, the Court finds that the Director Defendants are de

11 facto ERISA fiduciaries, and may be held liable under ERISA for a 12 failure to monitor the Committee members. See Gelardi v. Pertec 13 Computer Corp., 761 F.2d 1323, 1324 (9th Cir. 1985); Crowley, 234 F. 14 Supp. 2d at 229; Indep. Ass'n of Publishers' Employees, Inc. v. Dow 15 Jones & Company, Inc., 671 F. Supp. 1365, 1367 (S.D.N.Y. 1987). 16 17 c. The Committee The parties do not dispute that the Committee is a named In addition, Plaintiff alleges (Am. Compl.

18 fiduciary of the Plan.

19 ¶¶ 83-84), and Defendants do not contest, that the Committee is a de 20 facto fiduciary with respect to the Plan. 21 22 d. Mr. Siciliano Plaintiffs allege that Defendant Mr. Siciliano was IGT's

23 Interim Principal Financial Officer, Chief Accounting Officer and 24 Treasurer during the Class Period. The Amended Complaint (#36) does

25 not allege that Mr. Siciliano was a member of the Board or the 26 Committee, nor that he took any actions other than participating in 27 corporate earnings conference calls. (Am. Compl. ¶¶ 109, 120 (#36).) 28
14

1 Counsel for Plaintiffs did not articulate at the hearing on the 2 motions on March 10, 2011 any basis for Mr. Siciliano's fiduciary 3 status. As such, viewing the Amended Complaint (#36) and drawing

4 all reasonable inferences in the light most favorable to the 5 Plaintiffs, the Court finds that Plaintiffs have not sufficiently 6 alleged that Mr. Siciliano was a fiduciary with respect to the Plan. 7 Thus, the causes of action against Mr. Siciliano must be dismissed. 8 9 10 11 197.) ii. Count I: Failure to Prudently and Loyally Manage Plan Assets This count is alleged against all Defendants. (Am. Compl. ¶ Plaintiffs allege that Defendants failed to loyally and

12 prudently manage the assets of the Plan because Defendants knew or 13 should have known that IGT stock was not a suitable investment for 14 the Plan, but continued to offer IGT stock as an investment option 15 for Plan participants. (Id. ¶ 201.) Defendants argue that the Plan

16 expressly provided that IGT stock be offered as an investment 17 option, and so the Committee could not have breached a fiduciary 18 duty while preserving such option. (D's Memo. at 7 (#41).) In their

19 view, the Complaint is flawed because it seeks to impose liability 20 for decisions reached by individuals acting in a settlor capacity, 21 as opposed to a fiduciary one. See, e.g., Hughes Aircraft Co. v. 22 Jacobson, 525 U.S. 432, 444 (1999). Defendants further contend that

23 Plaintiffs assert a breach of fiduciary duty claim on an alleged 24 failure to diversify. 25 ERISA requires that a "fiduciary shall discharge his

26 duties...with the care, skill, prudence, and diligence under the 27 circumstances then prevailing that a prudent man acting in a like 28
15

1 capacity and familiar with such matters would use in the conduct of 2 an enterprise of a like character and with like aims." 29 U.S.C. § 3 1104(a)(1)(B). In evaluating an alleged breach of fiduciary duty to

4 prudently and loyally manage plan assets, the Ninth Circuit Court of 5 Appeals has adopted the Moench standard formulated by the Third 6 Circuit Court of Appeals in Moench v. Robertson, 62 F.3d 553 (3d 7 Cir. 1995). Quan v. Computer Scis. Corp., 623 F.3d 870 (9th Cir. 8 2010). The rebuttable Moench presumption provides that an eligible

9 individual account plan fiduciary who invests in employer stock is 10 presumed to have acted consistently with ERISA, which presumption 11 may be overcome by showing that the fiduciary abused his discretion. 12 Quan, 623 F.3d at 881. See Moench v. Robertson, 62 F.3d 553, 571 (3d 13 Cir. 1995). Specifically, the "plaintiff must show that the ERISA

14 fiduciary could not have believed reasonably that continued 15 adherence to the [plan's terms] was in keeping with the settlor's 16 expectations of how a prudent trustee would operate." Moench, 62 17 F.3d at 571. 18 The Ninth Circuit Court of Appeals has come to adopt the Moench In Wright, the Court did not reject, but

19 presumption over time.

20 declined to apply the Moench presumption, finding that the 21 plaintiffs' alleged facts "effectively preclude a claim under 22 Moench." Wright v. Or. Metallurgical Corp., 360 F.3d 1090, 1098 (9th 23 Cir. 2004). The Court went on to note that plaintiffs' prudence

24 claim would not avail under Moench or any other existing approach. 25 Id. In Wright, the Court noted in dicta its reservations that the

26 Moench standard conflicts with ERISA's diversification exemption 27 and/or could "inadvertently encourag[e] corporate officers to 28
16

1 utilize insider information for the exclusive benefit of the 2 corporation and its employees." Id. at 1098 n.4. 3 In Syncor, the Ninth Circuit Court of Appeals noted that the

4 Circuit had not yet adopted the Moench presumption, and declined to 5 do so. In re Syncor ERISA Litig., 516 F.3d 1095 (9th Cir. 2008). 6 The Court noted that the district court's determination that the 7 class did not rebut the Moench presumption "based solely on Syncor's 8 financial viability...is not an appropriate application of the 9 prudent man standard set forth in either Moench or 29 U.S.C. § 10 1104." Id. at 1102. 11 The Ninth Circuit Court of Appeals formally adopted the Moench

12 presumption in Quan. Quan v. Computer Scis. Corp., 623 F.3d 870, 881 13 (9th Cir. 2010). Here, the Court set aside its objections to the

14 Moench presumption outlined in Wright, that "1) the presumption 15 conflicts with ERISA's diversification exemption, 29 U.S.C. § 16 1004(a)(2); and 2) the presumption encourages fiduciaries to engage 17 in insider trading." Id. at 880. The Quan Court found that the

18 Moench presumption "is fully reconcilable with ERISA's statutory 19 text and does not encourage insider trading, when properly 20 formulated." Id. 21 Mere "stock fluctuations, even those that trend downward

22 significantly," are insufficient to rebut the Moench presumption. 23 Wright, 360 F.3d at 1099. Indeed, the Quan Court noted that

24 "[t]here is no bright-line rule as to how much evidence is needed to 25 rebut the Moench presumption." Quan, 623 F.3d at 883. However, "[a]

26 guiding principle... is that the burden to rebut the presumption 27 varies directly with the strength of a plan's requirement that 28
17

1 fiduciaries invest in employer stock." Id.

In general, courts have

2 set the bar for rebutting the Moench presumption high. Kirschbaum v. 3 Reliant Energy, Inc., 526 F.3d 243, 256 n. 12 (5th Cir. 2008) (citing 4 cases with facts insufficient to rebut the Moench presumption, including a 5 "company-wide financial woes and eighty percent drop in stock price" and 6 "widespread accounting violations, restated revenues for three years, and 7 seventy-five percent drop in stock price.").
Indeed, the Ninth Circuit

8 Court of Appeals in Wright found that an "ill-fated merger, reverse stock 9 split and seventy-five percent drop in stock price" were insufficient to 10 successfully rebut the Moench presumption. Id. 11 12 13 14 15 16 17 a. Plaintiffs' Claim for Imprudent Investment of Plan Assets, Alleging that Committee Members were Fiduciaries with the Discretion to Remove IGT Stock from the Menu of Investment Options Offered under the Plan, Fails to Rebut the Moench Presumption Fiduciaries must act "in accordance with the documents and

18 instruments governing the plan insofar as such documents and 19 instruments are consistent with the provisions of" ERISA. 29 U.S.C. 20 § 1104(a)(1)(D). 21 As stated above, the Ninth Circuit Court of Appeals has adopted

22 the rebuttable Moench presumption that an eligible individual 23 account plan fiduciary who invests in employer stock is presumed to 24 have acted consistently with ERISA, which presumption may be 25 overcome by showing that the fiduciary abused his discretion. Quan 26 v. Computer Scis. Corp., 623 F.3d 870, 881 (9th Cir. 2010). See 27 Moench v. Robertson, 62 F.3d 553, 571 (3d Cir. 1995) 28
18

Courts have

1 found that even facts alleging "ill-fated merger, reverse stock split 2 and seventy-five percent drop in stock price," "company-wide financial 3 woes and eighty percent drop in stock price" and "widespread accounting 4 violations, restated revenues for three years, and seventy-five percent 5 drop in stock price" are insufficient to rebut the Moench 6 presumption. See Kirschbaum, 526 F.3d at 256 n. 12. 7 The burden to rebut the Moench presumption "varies directly

8 with the strength of a plan's requirement that fiduciaries invest in 9 employer stock." Wright, 360 F.3d at 1099. The Plan here

10 specifically contemplates that employees will have the opportunity 11 to purchase the company's securities. Section 3.8(b)(1) of the Plan

12 provides that "[o]ne of the Investment Funds available shall be the 13 IGT Stock Fund." (#36-2 at 44.) The Court is not persuaded that the

14 Plan language contemplating the option of an IGT Stock Fund is 15 enough to immunize Defendants from any potential liability as 16 fiduciaries. While Defendant IGT emphasizes that the decision to

17 offer IGT stock as a Plan option was one made in a settlor 18 capacity,2 the relevant question for the Court's functional inquiry 19 here is whether the Committee had any discretionary authority to 20 remove the IGT Stock Plan option after it had been created. Kayes v. 21 Pac. Lumber Co., 51 F.3d 1449, 1459 (9th Cir. 1995). See also In re 22 Wash. Mut., Inc. Sec., 2009 U.S. Dist. LEXIS 109961 at *30. 23 point, Plaintiffs point to Section 3.8(a) of the Plan, which 24 provides that the "Committee may, in its discretion, terminate any 25 26 27 28 Defendant IGT contends that plan design is a settlor, not a fiduciary, function, and so IGT cannot be held liable for the inclusion of the IGT stock fund as an investment option under the Plan.
19
2

On this

1 Investment Fund." (#36-2 at 43.)

While Defendants would have the

2 Court read this provision to mean that the Committee only had the 3 authority to replace Investment Funds other than the IGT Stock Fund, 4 the Plan language suggests that the term "Investment Fund" 5 encompasses the IGT Stock Fund. See In re Wash. Mut., Inc. Sec., Specifically, the Plan

6 2009 U.S. Dist. LEXIS 109961 at *30-31.

7 defines "Investment Fund" as "one of the funds established by the 8 Committee for the investment of the assets of the plan pursuant to 9 Section 3.8," which section contemplates the creation of the IGT 10 Stock Fund at Section 3.8(b). Id. at *18. Plaintiffs' allegation 11 that the "Committee...had the power to terminate any Investment Fund 12 Company Stock," including IGT stock, appears sufficient at this 13 stage in light of the Plan's embracive use of "Investment Fund." Id. 14 at *31. The terms of the Plan create some ambiguity as to whether

15 the Committee's discretion to terminate Investment Funds would 16 include the termination of the IGT Stock Fund. Nevada law allows

17 for the introduction of extrinsic evidence to resolve ambiguous 18 contract language. Fondren v. R.D. Schmidt, Inc., 1991 U.S. App. 19 LEXIS 18441 (9th Cir. May 15, 1991). Thus, we note that there could

20 be extrinsic evidence that would clarify the Plan's ambiguity with 21 respect to whether the Committee could terminate the IGT stock fund. 22 Resolving this ambiguity in Plaintiffs' favor at the motion to 23 dismiss phase, we find a plausible claim that Committee members were 24 fiduciaries with the discretion to remove IGT stock from the menu of 25 investment options offered under the Plan. 26 Discretion to remove the IGT Stock Fund as an investment option

27 will lower the threshold of evidence necessary to rebut the Moench 28
20

1 presumption, but is alone insufficient to do so.

Plaintiffs have

2 not alleged facts sufficient to show that Defendants abused their 3 discretion in retaining the IGT Stock Fund as an investment option 4 under the Plan. Here, by the end of Plan year 2008, the amount of

5 shares of IGT stock held by the Plan increased to 2,878,778, while 6 the market value of such shares decreased to $34,228,670, 7 representing a decrease of 67%. (Am. Compl. ¶ 67.) Courts including 8 the Ninth Circuit Court of Appeals in Wright have found that more 9 substantial decreases in stock prices coupled with other factors 10 such as "company-wide financial woes," "widespread accounting 11 violations" or an "ill-fated merger" and reverse stock split are 12 insufficient to rebut the Moench presumption. Kirschbaum v. Reliant 13 Energy, Inc., 526 F.3d 243, 256 n. 12 (5th Cir. 2008)
Although the

14 threshold will be lower in this case than in others due to our assumption 15 that Defendants had discretion to terminate the IGT Stock Fund as an 16 investment option under the Plan, Plaintiffs' allegations have failed to 17 show an abuse of discretion sufficient to rebut the Moench presumption on 18 the part of Defendants in maintaining the IGT Stock Fund as an investment 19 option. See id. 20 Therefore, on this basis, we find that Plaintiffs' allegations

21 are insufficient to sustain a claim for breach of the fiduciary duty 22 of prudence and loyalty for imprudent investment of Plan assets with 23 respect to Defendants. 24 25 26 27 28
b. Plaintiffs' Claim Based on Misrepresentation and Failure to Disclose Material Facts to Plan Participants is Plausible

Plaintiffs allege that Defendants misrepresented and failed to
21

1 disclose material facts with respect to the Plan to Plan 2 participants through actions such as the incorporation of false SEC 3 statements into the Plan documents and the making of misleading 4 statements to the press and IGT shareholders. (Am. Compl. ¶ 216 5 (#36).) We have found that IGT was a fiduciary with respect to

6 communications regarding the Plan, and Defendants do not dispute 7 that the Committee was a fiduciary with respect to Plan 8 communications. 9 "[A]n ERISA fiduciary has a duty under section 1104(a) to

10 convey complete and accurate information when it speaks to 11 participants and beneficiaries regarding plan benefits." In re Xerox 12 Corp. ERISA Litig., 483 F. Supp. 2d 206 (2007)(quoting Unisys Sav. 13 Plan Litig., 74 F.3d at 441). In Electronic Data Systems, the court 14 found that the plaintiffs had sufficiently pled a claim for failure 15 to provide complete and accurate information to plan participants 16 and beneficiaries where: 17 18 19 20 21 22 23 24 25 26 27 28 "Plaintiffs allege that the duty of loyalty `requires fiduciaries to speak truthfully to participants, not to mislead them regarding the plan or plan assets, and to disclose information that participants need in order to exercise their rights and interests under the Plan.' First Am. Consolidated Class Action Compl. P 171. Defendants allegedly breached their fiduciary duties by not disclosing information which would have revealed problems with EDS stock as an investment, when Defendants allegedly knew that EDS stock was overpriced because EDS faced serious financial
22

1 2 3 4 5 6

difficulties unknown to the public. In other words, Plaintiffs allege that Defendants, as fiduciaries, offered their beneficiaries an investment which they knew to be unsound and concealed any information that would have allowed the beneficiaries to discover that the investment was unsound."

7 In re Elec. Data Sys. Corp. ERISA Litig., 305 F. Supp. 2d 658, 8 671-72 (E.D. Tex. 2004). See also Rankin v. Rots, 278 F. Supp. 9 2d 853, 876-77 (E.D. Mich. 2003) ("Defendants had a duty under 10 securities laws not to make any material misrepresentations; 11 they also had a duty to disseminate truthful information to 12 plan participants, including the information contained in SEC 13 filings."); In re WorldCom, Inc. ERISA Litig., 263 F. Supp. 2d 14 745, 766 (S.D.N.Y. 2003) ("An ERISA fiduciary may not knowingly 15 present false information regarding a plan investment option to 16 plan participants. There is no exception to the obligation to 17 speak truthfully when the disclosure concerns the employer's 18 stock."). 19 Courts have held that dismissal at this stage is

20 inappropriate where SEC filings are incorporated by reference 21 into documents provided to plan participants because the 22 documents containing SEC filings are presumably used to convey 23 information to plan participants regarding the safety and value 24 of the company stock option within the plan. In re AEP Litig., 25 327 F. Supp. 2d 812, 825 (S.D. Ohio 2004) (citing Vivien v. 26 Worldcom, Inc., 2002 U.S. Dist. LEXIS 27666 at *1, *7 (N.D. 27 Cal. July 26, 2002)); Schied v. Dynegy, 309 F. Supp. 2d 861, 28
23

1 888 (S.D. Tex. 2004). 2 Therefore, on this basis, we find that Plaintiffs'

3 allegations are sufficient to sustain a claim for breach of the 4 fiduciary duty to prudence and loyalty for misrepresentation 5 and failure to disclose material facts with respect to IGT and 6 the Committee. 7 8 9 10 c. Plaintiffs Do Not Appear to Assert a Breach of Fiduciary Duty Claim Based on a Failure to Diversify Defendants appear to conflate Plaintiffs' breach of

11 fiduciary duty claim for failing to remove the IGT Stock Fund 12 from the group of Investment Funds offered by the Plan with a 13 claim for failure to diversify. It appears to the Court,

14 however, that the Amended Complaint (#36) does not, by its 15 terms, advance a claim for breach of fiduciary duty based on a 16 failure to diversify. Rather, Plaintiffs' allegations more

17 closely reflect those in In re Syncor, where plaintiffs 18 asserted a claim for breach of fiduciary duty based on the 19 selection of company stock as an investment option. In re 20 Syncor ERISA Litig., 516 F.3d 1095, 1102 (9th Cir. 2008) 21 (differentiating prudence claims based on the selection of 22 investments from diversification claims). 23 24 iii. Count II: Breach of Duty to Monitor Where the discretion to appoint and remove fiduciaries

25 exists, so exists the duty to monitor such fiduciaries. 26 Batchelor v. Oak Hill Med. Group, 870 F.2d 1446, 1448-49 (9th 27 Cir. 1989) (citing 29 C.F.R. § 2509.75-8, D-4); Leigh v. Engle, 28
24

1 727 F.2d 113, 133-34 (7th Cir. 1984) (same).

Plaintiffs have

2 successfully alleged the fiduciary status of the Director 3 Defendants with respect to the discretion to appoint the 4 Committee members. As such, Plaintiffs' allegations are

5 sufficient to sustain a claim for breach of duty to monitor as 6 to the Director Defendants. 7 8 9 iv. Count III: Breach of Duty of Loyalty - Failure to Avoid or Ameliorate Conflicts of Interest Plaintiffs contend that Defendants "failed to avoid or

10 ameliorate inherent conflicts of interests which crippled their 11 ability to function as independent, `single-minded' fiduciaries 12 with the best interests of the Plan and Plan participants 13 solely in mind." (Am. Comp. ¶ 7 (#36).) 14 While Plaintiffs do not specifically state so, Plaintiffs'

15 allegations appear to relate to the potential conflict of 16 interest affecting Plan fiduciaries who received compensation 17 from IGT in the form of company stock. However, such

18 allegations are insufficient to state a claim for beach of the 19 fiduciary duty of loyalty under ERISA. See In re Syncor ERISA 20 Litig., 351 F. Supp. 2d at 987-88 (noting that "[u]nder this 21 theory, corporate defendants would always have a conflict of 22 interest"); In re Citigroup ERISA Litig., 2009 U.S. Dist. LEXIS 23 78055 at *26 (S.D.N.Y. Aug. 31, 2009) (holding that allegations 24 that the defendants' compensation was "tied to the performance 25 of Citigroup stock" were insufficient to state an actionable 26 claim for conflict of interest); In re WorldCom, 263 F. Supp. 27 2d at 768 (S.D.N.Y. 2003) (holding that allegations that the 28
25

1 defendant owned shares of WorldCom stock were insufficient to 2 establish an actionable conflict of interest). Indeed, ERISA

3 explicitly permits a corporate officer, employee, or agent to 4 serve as a plan fiduciary. See 29 U.S.C. § 1108(c)(3) ("Nothing 5 in section 1106 of this title shall be construed to prohibit 6 any fiduciary from . . . serving as a fiduciary in addition to 7 being an officer, employee, agent, or other representative of a 8 party in interest."). 9 Therefore, on the foregoing basis, Plaintiffs' claim for

10 breach of the fiduciary duty of loyalty must be dismissed. 11 12 13 v. Count IV: Breach of Duties and Responsibilities as Co-Fiduciaries Plaintiffs must first state one or more valid claims for

14 breach of fiduciary duty under ERISA before they may allege a 15 claim for breach of duties and responsibilities as co16 fiduciaries. ERISA renders a fiduciary liable for the breach

17 of another fiduciary if he or she (i) participates knowingly 18 in, or knowingly undertakes to conceal, an act or omission of 19 such other fiduciary, knowing such act or omission is a breach; 20 or (ii) enables another fiduciary to commit a breach; or (iii) 21 has knowledge of a breach by such other fiduciary, unless he 22 makes reasonable efforts to remedy the breach. 29 U.S.C. § 23 1105(a). 24 To bring a claim under 29 U.S.C. § 1105(a)(1), Plaintiffs

25 "`must show: (1) that a co-fiduciary breached a duty to the 26 plan, (2) that the fiduciary knowingly participated in the 27 breach or undertook to conceal it, and (3) damages resulting 28
26

1 from the breach.'" In re Touch Am. Holdings, Inc. ERISA Litig., 2 2006 U.S. Dist. LEXIS 94707 (D. Mont. June 15, 2006), quoting 3 Silverman v. Mutual Ben. Life Ins. Co., 941 F. Supp. 1327, 1335 4 (E.D.N.Y. 1996), aff'd, 138 F.3d 98 (2nd Cir. 1998)(citation 5 omitted). 6 A claim under 29 U.S.C. § 1105(a)(2) requires a plaintiff

7 to prove that the fiduciary "failed to comply with its duties 8 under ERISA, and thereby enabled a co-fiduciary to commit a 9 breach." In re Enron Corp. Sec. Derivative & ERISA Litig., 284 10 F. Supp. 2d 511, 581 (S.D. Tex. 2003)(citing Silverman, 941 F. 11 Supp. at 1335). Unlike co-fiduciary liability under 29 U.S.C. § 12 1105(a)(1) and (3), co-fiduciary liability under § 1105(a)(2) 13 does not require a plaintiff to prove knowledge. Id. 14 The elements of a cause of action under § 1105(a)(3)

15 require a plaintiff to show: "(1) that the fiduciary had 16 knowledge of the co-fiduciary's breach, and (2) that the 17 fiduciary failed to make reasonable efforts under the 18 circumstances to remedy the breach." Silverman, 941 F. Supp. at 19 1337. 20 Proof of actual, rather than constructive, knowledge is

21 required under 29 U.S.C. § 1105(a)(1) and (3). Such co22 fiduciary liability has been labeled "`knowing participation' 23 liability." LeBlanc v. Cahill, 153 F.3d 134, 151-52 (4th Cir. 24 1998)(citation omitted). 25 The allegations of co-fiduciary liability in the Amended

26 Complaint (#36) are insufficient to plead a claim for co27 fiduciary liability against any Defendant under 29 U.S.C. § 28
27

1 1105(a)(1) and § 1105(a)(3).

The types of co-fiduciary breach

2 alleged are unclear, and the allegations do not clearly 3 identify actions taken by each Defendant alleged to constitute 4 co-fiduciary breach. (Am. Compl. ¶¶ 8, 186-87, 191-96, 243, 245 5 (#36).) The allegations are devoid of specific facts, even in

6 the most favorable light, which tend to show any particular 7 Defendant was a knowing participant in another's putative 8 breach. Id. 9 However, Plaintiffs have sufficiently alleged a claim for Co-fiduciary

10 co-fiduciary breach under 29 U.S.C. § 1132(a)(2).

11 liability may be shown under this section by proof that the 12 fiduciary failed to comply with its duties under ERISA, thereby 13 enabling other Defendants' fiduciary breaches. The pleadings

14 are sufficient to state a claim for such breach. See, e.g., In 15 re Touch Am. Holdings, Inc. ERISA Litig., 2006 U.S. Dist. LEXIS 16 94707 at *37 (D. Mont. 2006). 17 Viewing the Amended Complaint (#36) and drawing all

18 reasonable inferences in the light most favorable to the 19 Plaintiffs, the Court has found that Plaintiffs have 20 sufficiently alleged the following claims for breach of 21 fiduciary duty: 22 (i) breach of duty of prudence and loyalty with respect to

23 the Committee and IGT because Plaintiffs have sufficiently 24 shown that the Committee and IGT failed to disclose material 25 facts with respect to the Plan to Plan participants; and 26 (ii) breach of duty to monitor with respect to the

27 Director Defendants because Plaintiffs have successfully 28
28

1 alleged the fiduciary status of the Director Defendants with 2 respect to the discretion to appoint the Committee members. 3 Therefore, we find that Plaintiffs have sufficiently

4 alleged claims for co-fiduciary liability with respect to those 5 claims. 6 7 8 vi. Conclusion Regarding Claims of Breach of Fiduciary Duty Plaintiffs have successfully asserted the following

9 breaches of fiduciary duty by Defendants: (i) breach of duty of 10 prudence and loyalty regarding failure to disclose material 11 facts regarding the Plan with respect to the Committee and IGT; 12 (ii) breach of duty to monitor with respect to the Director 13 Defendants; and (iii) breach of co-fiduciary duty under 29 14 U.S.C. § 1132(a)(2) with respect to (i) and (ii). Contrary to

15 Defendants' contentions, Plaintiffs do not appear to assert a 16 breach of fiduciary duty claim based on a failure to diversify. 17 The allegations of co-fiduciary liability in the Amended 18 Complaint (#36) are insufficient to plead a claim for co19 fiduciary liability against any Defendant under 29 U.S.C. § 20 1105(a)(1) and § 1105(a)(3). 21 22 B. Defendants' Motion for Summary Judgment (#44) In their MSJ (#44), Defendants contend that Plaintiffs

23 lack standing to bring their ERISA claims as a result of 24 certain releases signed by Plaintiffs at the termination of 25 their employment (the "Releases," and each, a "Release") in 26 27 28
29

1 consideration for severance pay.3 2 In Varity Corp. v. Howe, the United States Supreme Court

3 held that an individual may bring a claim for breach of fiduciary 4 duty under § 502(a)(3) of ERISA. 5 489 (1996). Varity Corp. v. Howe, 516 U.S.

Here, however, Plaintiffs are not requesting

6 individual relief, but relief for the Plan and all of the Plan's 7 participants, including themselves. (Am. Compl. ¶ 1. (#36)) 8 Bowles v. Reade, 198 F.3d 752 (9th Cir. 1999); cf. Mertens v. 9 Black, 948 F.2d 1105, 1106 (9th Cir. 1991) (holding that 10 plaintiffs made individual claims for breach of fiduciary duty 11 where they neither purported to represent the plan nor sought a 12 recovery for the plan) (citing Koch v. Kaiser Steel Retirement 13 Plan, 947 F.2d 1412 (9th Cir. 1991)). Because Plaintiffs' claims

14 were not individual, Plaintiffs could not settle such claims 15 without the consent of the Plan. Bowles v. Reade, 198 F.3d at

16 760. As such, the Releases signed by Plaintiffs cannot be found 17 to have released Plaintiffs' claims on behalf of the Plan under § 18 502(a)(3) of ERISA. Id. at 759. See also In re Schering Plough 19 Corp. ERISA Litig., 589 F.3d 585, 594 (3rd Cir. 2009)(plaintiff's 20 release does not bar her from bringing the § 502(a)(2) claim on 21 behalf of the plan); Johnson v. Couturier, No. 05-2046, 2006 U.S. 22 Dist. LEXIS 77757 at *2 (E.D. Cal. Oct. 13, 2006) (release does 23 not preclude § 502(a)(2) action); In re JDS Uniphase Corp. ERISA 24 Litig., 2006 US Dist. LEXIS 68271 (N.D. Cal. Sept. 11, 2006) 25 26 27 28 Plaintiffs have standing to bring suit because their claims apply to Plan participants as a whole, and because ERISA authorizes participants such as Plaintiffs to sue for plan-wide relief for breach of fiduciary duty.
30
3

1 ("The release . . . do[es] not bar ERISA fiduciary duty claims 2 brought by plan beneficiaries on behalf of the plan."). 3 On the foregoing basis, we find that Plaintiffs have

4 standing to bring their ERISA claims. 5 6 7 8 9 C. Defendant IGT Profit Sharing Committee's Alternative Motion to Dismiss (#46) i. The Committee is a Juridical Entity that Qualifies as a "Person" Capable of Being Sued Under ERISA Defendant Committee claims that "Plaintiffs cannot state a

10 viable ERISA claim against the Committee because the Committee 11 is not a `person' capable of being sued for breach of fiduciary 12 duty under ERISA." (MTD #46 at 3.) Section 502(a) of ERISA

13 provides that liability for a breach of fiduciary duty may only 14 be imposed on a "person who is a fiduciary with respect to a 15 plan . . . ." 29 U.S.C. § 1109(a). Under ERISA, "person" means

16 "an individual, partnership, joint venture, corporation, mutual 17 company, joint-stock company, trust, estate, unincorporated 18 organization, association, or employee organization." 29 U.S.C. 19 § 1002(9). Plaintiffs contend that the Committee qualifies as

20 an "unincorporated organization," "association" and "employee 21 organization," under ERISA, and that the bulk of case law 22 indicates that the Committee qualifies as a "person" liable 23 under ERISA. 24 As ERISA does not define "association," the term should be

25 given "its ordinary or natural meaning." Johnson v. United 26 States, 130 S. Ct. 1265, 1270 (2010). The United States

27 Supreme Court has looked to sources such as Black's Law 28
31

1 Dictionary and Webster's Third International Dictionary to 2 define an association as "`an organization of persons having a 3 common interest,'" and "a `collection of persons who have 4 joined together for a certain object.'" Boyle v. United States, 5 129 S. Ct. 2237, 2244 (2009). The Supreme Court has commented

6 that associations are "amorphous legal creatures." Rowland v. 7 California Men's Colony, 506 U.S. 194, 204 (1993). As such, a

8 broad construction of the term is reasonable. See, e.g., Kayes 9 v. Pacific Lumber Co., 1993 U.S. Dist. LEXIS 21090 at *13 (N.D. 10 Cal. April 14, 1993). On this basis, the Committee may

11 reasonably be defined as an association, and therefore a 12 person, which may be held liable under ERISA for breach of 13 fiduciary duty. 14 The United States Supreme Court has held that "ERISA

15 explicitly authorizes suits against fiduciaries and plan 16 administrators to remedy statutory violations, including 17 breaches of fiduciary duty and lack of compliance with benefit 18 plans." Firestone Tire & Rubber Co. V. Bruch, 489 U.S. 101, 110 19 (1989) (citing 29 U.S.C. §§ 1132(a), 1132(f)). 20 Further, the Ninth Circuit Court of Appeals has held that

21 ERISA authorizes suits against fiduciaries as plan 22 administrators. Concha v. London, 62 F.3d 1493, 1501 (9th Cir. 23 1995). Hence, the Committee acting as such is a person or In addition, other

24 entity capable of being sued under ERISA.

25 courts have interpreted this holding to indicate that a 26 committee acting as a plan administrator and/or fiduciary is a 27 legal entity capable of being sued under ERISA. See, e.g., In 28
32

1 re Enron Corp. Sec., Derivative & "ERISA" Litig., 284 F. Supp. 2 2d 511, 614-18 (S.D. Tex. 2003); MacRae v. Rogosin Converters, 3 Inc., 301 F. Supp. 2d 471, 476 (M.D.N.C. 2004); Breedlove v. 4 Teletrip Co., 1993 U.S. Dist. LEXIS 10278 (N.D. Ill. July 26, 5 1993); In re Robertson, 115 B.R. 613, 622 (Bankr. N.D. Ill. 6 1990); Reynolds v. Bethlehem Steel Corp., 619 F. Supp. 919, 928 7 (D. Md. 1984); Boyer v. J.A. Majors Co., Employees' Profit 8 Sharing Plan, 481 F. Supp. 454, 458 (N.D. Ga. 1979). 9 this authority persuasive.4 10 Here, the Committee was a group of individuals united for The Plan We find

11 the common purpose of administering the Plan.

12 documents name the Committee as the Plan Administrator and 13 Fiduciary. (IGT Profit Sharing Plan ¶ 7.8 (#36-2).) As an

14 association that is the administrator and named fiduciary of 15 the Plan, the Committee qualifies as a "person" that may be 16 sued under ERISA. Having found that the Committee qualifies as

17 an association, we need not consider whether it would also 18 qualify as an employee organization and/or unincorporated 19 organization for purposes of ERISA. 20 21 22 23 24 25 26 27 28 As noted by Plaintiffs, the cases cited by Defendants for the proposition that a committee is not a legal entity capable of being sued under ERISA are distinguishable. One such line of cases considers committees which are not plan administrators, as here, while the other relies on North Carolina state law, which is not here at issue.
33
4

ii. The Committee was Not Timely Served Under Federal Rules of Civil Procedure 4. The Court Deems it

Appropriate to Grant Plaintiffs an Extension of Time to Properly Serve the Committee.

1

Defendant Committee alleges that dismissal is appropriate

2 under Federal Rule of Civil Procedure 12(b)(5) because the 3 Committee was not properly served with process pursuant to 4 Federal Rule of Civil Procedure 4(h) within the time period 5 specified by Federal Rule of Civil Procedure 4(m). (Alternative 6 MTD at 4-5 (#46).) Plaintiffs bear the burden of establishing

7 the validity of service of process when defendants make a 8 motion to dismiss pursuant to Federal Rule of Civil Procedure 9 12(b)(5). See Brockmeyer v. May, 383 F.3d 798, 801 (9th Cir. 10 2004). 11 Pursuant to Federal Rule of Civil Procedure 4(h), a

12 domestic or foreign corporation, partnership or other 13 unincorporated association that is subject to suit under a 14 common name may be served (i) by delivering a copy of the 15 summons and complaint to "an officer, a managing or general 16 agent, or any other agent authorized by appointment or by law 17 to receive service of process . . ."; or (ii) in accordance 18 with state rules regarding service of such entity under Federal 19 Rule of Civil Procedure 4(e)(1). As Nevada law generally does

20 not permit suit or service on an unincorporated association, 21 service on the Committee must have been made on an "officer, 22 managing or general agent, or any other agent authorized by 23 appointment or by law to receive service of process" in order 24 to be valid. See Strotek Corp. v. Air Tranp. Ass'n of Am., 300 25 F.3d 1129, 1134 n.2 (9th Cir. 2002). 26 Service of process on a defendant must be made within one

27 hundred twenty (120) days of filing a complaint. FED. R. CIV. P. 28
34

1 4(m).

Plaintiffs' original complaint (#1), naming the As

2 Committee as a defendant, were filed on October 2, 2009.

3 Defendants allege, the filing of Plaintiffs' Amended Complaint 4 (#36) "did not re-start the clock on service." (Alternative MTD 5 at 8 (#46).) The filing of an amended complaint does not re-

6 start the one hundred twenty day period provided by Federal 7 Rule of Civil Procedure 4(m) "except as to those defendants 8 newly added in the amended complaint." Bolden v. City of

9 Topeka, 441 F.3d 1129, 1148 (10th Cir. 2006). 10 Here, service of process was made upon Chrissy Lane,

11 Manager of Legal Administration at IGT. (Lane Affidavit ¶ 2 12 (#47).) While there is some dispute over whether Ms. Lane

13 represented to the process server that she was authorized to 14 accept service on behalf of the Committee (Compare Jones 15 Affidavit at 1 (#57) with Lane Affidavit ¶ 5 (#47)), the 16 parties do not contest that Ms. Lane is not an officer or agent 17 of the Committee, nor was she at the time of attempted service 18 of process. 19 Plaintiffs contend, however, that "[i]n the Ninth Circuit,

20 `service of process is not limited solely to officially 21 designated officers, managing agents or agents appointed by law 22 for the receipt of process.'" (Resp. to Alternative MTD at 9 23 (#55).) Direct Mail Specialists v. Eclat Computerized 24 Technologies, Inc., 840 F.2d 685, 688 (9th Cir. 1988). 25 Plaintiffs assert that service may be made upon a 26 representative so integrated with the organization that he will 27 know what to do with the papers. 28 In support of their position,
35

Rather,

1 Plaintiffs cite cases indicating that service on an office 2 manager or secretary of an organization may be sufficient in 3 the Ninth Circuit. See, e.g., Direct Mail Specialists, Inc., 4 840 F.2d at 688-89). 5 While service on a secretary or office manager of an

6 organization may be sufficient under Ninth Circuit case law for 7 purposes of Federal Rule of Civil Procedure 4(m), Plaintiffs do 8 not address the fact that Chrissy Lane was not an individual 9 who held a position that indicates authority within the 10 organization being served. Specifically, Chrissy Lane was an

11 employee of IGT, and there is no evidence in the record to 12 indicate that she held any position or maintained any 13 affiliation with the Committee. 14 Lane was improper. 15 In the alternative, Plaintiffs request an extension of As such, service on Chrissy

16 time to serve the Committee. (Resp. to Alternative MTD n.2 17 (#55).) The Court "has broad discretion to extend time for

18 service under Rule 4(m)." Mann v. Am. Airlines, 324 F.3d 1088, 19 1090 (9th Cir. 2003). In considering whether to grant an

20 extension, "a district court may consider factors `like statute 21 of limitations bar, prejudice to the defendant, actual notice 22 of a lawsuit, and eventual service." Efaw v. Williams, 473 F.3d 23 1038, 1040 (9th Cir. 2007) (quoting Troxell v. Fedders of N. 24 Am. Inc., 160 F.3d 381, 383 (7th Cir. 1998). 25 of limitations has not yet run. Here, the statute

There would be no prejudice to

26 Defendants because Plaintiffs have the option of filing another 27 action against the Committee. 28 Defendants did have actual
36

1 notice of the lawsuit and timely filed a motion to dismiss 2 (#46) in response to the Amended Complaint (#36). In addition,

3 it appears that Plaintiffs reasonably believed that the 4 Committee was properly served. Indeed, the affidavit of the

5 process server Mr. Jones states that Chrissy Lane "indicated 6 she was authorized to accept on behalf of the IGT Profit 7 Sharing Committee." (Jones Affidavit at 1 (#57).) 8 We conclude on this basis that Plaintiffs should be

9 granted an extension of time to properly serve the Committee 10 under Federal Rule of Civil Procedure 4(m). 11 12 VI. Conclusion Plaintiffs have alleged that Defendants breached their

13 fiduciary duties under Section 502(a) of ERISA. 14 We have found that Defendant IGT is a de facto fiduciary

15 with respect to communications regarding the Plan and with 16 respect to the appointment, monitoring and removal of the 17 Trustee of the Plan. Director Defendants are de facto

18 fiduciaries with respect to the appointment, monitoring and 19 removal of the Committee members. Defendant Committee is a

20 named and de facto trustee with respect to the administration 21 of the Plan. Finally, we have found that Defendant Siciliano

22 is not a fiduciary with respect to the plan. 23 Plaintiffs have sufficiently alleged the following claims

24 for breach of fiduciary duty: (i) breach of duty of prudence 25 and loyalty regarding failure to disclose material facts 26 regarding the Plan with respect to the Committee and IGT; and 27 (ii) breach of duty to monitor with respect to the Director 28
37

1 Defendants.

In addition, Plaintiffs have sufficiently alleged

2 claims for co-fiduciary liability against the Committee, IGT 3 and the Director Defendants with respect to those claims. 4 IT IS, THEREFORE, HEREBY ORDERED that Defendants'

5 motion to dismiss (#40) is GRANTED IN PART and DENIED IN PART, 6 on the following basis: 7 GRANTED as to the claim of failure to avoid conflicts

8 of interest against all Defendants; 9 GRANTED as to the claim of breach of prudence and

10 loyalty with respect to the imprudent investment of Plan assets 11 against all Defendants. 12 GRANTED as to the claim of breach of prudence and

13 loyalty with respect to the failure to disclose material facts 14 regarding the Plan against Defendants Siciliano and Director 15 Defendants; 16 GRANTED as to the claim of co-fiduciary liability

17 against all Defendants under 29 U.S.C. § 1105(a)(1) and 29 18 U.S.C. § 1105(a)(3) and against Defendant Siciliano under 29 19 U.S.C. § 1105(a)(2); 20 DENIED as to the claim of breach of duty to monitor

21 against Defendant IGT and Director Defendants; 22 DENIED as to the claim of breach of prudence and

23 loyalty with respect to the failure to disclose material facts 24 regarding the Plan against Defendants IGT and Committee; and 25 DENIED as to the claim of co-fiduciary liability

26 against Defendants Committee, IGT and Director Defendants under 27 29 U.S.C. § 1105(a)(2). 28
38

1

IT IS HEREBY FURTHER ORDERED that Defendants' motion for

2 summary judgment (#44) is DENIED. 3 IT IS HEREBY FURTHER ORDERED that Defendant IGT Profit

4 Sharing Committee's alternative motion for summary judgment 5 (#46) is DENIED. 6 IT IS HEREBY FURTHER ORDERED that Plaintiffs shall have

7 twenty-one (21) days from the date hereof to properly serve 8 Defendant IGT Profit Sharing Committee. 9 10 DATED: March 16th 2011. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
39

____________________________ UNITED STATES DISTRICT JUDGE