In Re UBS Erisa Litigation
Filing
105
OPINION AND ORDER re: 83 MOTION to Dismiss filed by Stephen Baird, Edward O'Dowd, Richard Duron, Executive Board of UBS AG, The Retirement Board and Savings Plan Committee, Barbara Amone, UBS AG, Simon Canning, UBS Board o f Directors, Jaime Taicher, Robert Wolf, Michael Daly, Per Dyrvik, Ursula Mills, Joe Scoby. Because Plaintiff lacks standing to pursue the claims that remain in this action, Defendants' motion to dismiss is granted. Additionally, because Plaintiff fails to satisfy the standards for leave to amend under Rule 15(a), Plaintiff's motion seeking leave to amend is denied. The Clerk of the Court is respectfully directed to terminate the motion located at docket entry 83 and to close this case. (Signed by Judge Richard J. Sullivan on 9/29/2014) (mro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
_____________________
No. 08-cv-6696 (RJS)
_____________________
IN RE UBS ERISA LITIGATION
OPINION AND ORDER
September 29, 2014
_____________________
RICHARD J. SULLIVAN, District Judge:
Lead
Plaintiff,
Debra
Taveras
(“Plaintiff”), brings this putative class action
against UBS and certain of its committees,
committee
members,
and
directors
(collectively,
“Defendants”),
alleging
violations of fiduciary duties established by
the Employment Retirement Income
Security Act of 1974 (“ERISA”), 29 U.S.C.
§ 1001, et seq.1 Now before the Court are
Defendants’ motion to dismiss Plaintiff’s
remaining claims pursuant to Rules 12(b)(1)
and 12(b)(6) of the Federal Rules of Civil
Procedure, and Plaintiff’s motion to file an
amended complaint pursuant to Rule 15(a)
of the Federal Rules of Civil Procedure. For
the reasons set forth below, the Court grants
Defendants’ motion to dismiss and denies
Plaintiff’s motion to amend.
I. BACKGROUND
The facts underlying this case were
thoroughly discussed in the Court’s March
24, 2011 Memorandum and Order. See In re
UBS AG ERISA Litig., No. 08-cv-6696
(RJS), 2011 WL 1344734, at *1–3
(S.D.N.Y. Mar. 24, 2011) (“March 24
Order”). Nevertheless, a brief recitation of
key facts and procedural history is needed to
place the instant motion in context.
1
The relevant claims of the Consolidated Amended
Class Action Complaint (Doc. No. 22 (the “Amended
Complaint” or “Compl.”)) name UBS AG, the
Executive Board of UBS AG (the “Board”), and the
Retirement Board and Savings Plan Committee (the
“SIP Committee”) as Defendants, as well as the
following board and committee members: Barbara
Amone, Stephen Baid, Simon Canning, Michael
Daly, Richard Duron, Per Dyrvik, Ursula Mills,
Edward O’Dowd, Joe Scoby, Jaime Taicher, Robert
Wolf, Marten Hoekstra, and Raoul Weil. Unless
otherwise noted, “UBS” and the “Company” refer to
Defendant UBS AG and its wholly-owned
subsidiaries.
A. Facts
UBS is a Swiss bank and financial
institution that provides wealth management
services to clients worldwide.2 (Compl.
2
The facts are drawn from the Amended Complaint
filed on November 14, 2008. (Doc. No. 22 (the
“Amended Complaint” or “Compl.”).) In deciding
Defendants’ motion, the Court has considered
Defendants’ memorandum of law in support of their
motion to dismiss (Doc. No. 84 (“Mem.”)), Plaintiff’s
¶ 16.) In 2000, UBS developed a plan to
expand into the United States investment
banking market by, among other things,
acquiring large quantities of fixed-income
assets. These assets included residential
mortgage backed securities (“RMBS”) and
collateralized debt obligations (“CDOs”),
which were made up almost exclusively of
American subprime mortgages. (Compl.
¶¶ 99, 103.) Over the next several years,
UBS amassed a $100 billion portfolio
consisting of these assets. (Compl. ¶ 103.)
In October 2007, UBS began taking large
write-downs of these holdings, eventually
resulting in $43 billion worth of writedowns by August 2008, leading to the
Company’s first ever annual loss and a
precipitous drop in its share price. (Compl.
¶¶ 120, 160).
Under the terms of the plan, participants
voluntarily contribute to the SIP and “direct
the SIP to purchase investments with those
contributions from options pre-selected by
[the SIP Committee] which are then
allocated to
Participants’ individual
accounts.” (Compl. ¶ 42; see also
Declaration of Robert J. Giuffra, Jr., dated
Sept. 25, 2013, Doc. No. 85 (“Giuffra
Decl.”), Ex. 2 (“SIP Plan Doc.”), art. 9.1(b)
(“[I]nvestment . . . shall be made in
accordance with the Member investment
elections in effect from time to time.”
(emphasis added)). The SIP’s “assets are
invested in a master trust which in turn
invests in mutual funds, commingled funds,
separately-managed accounts, and the UBS
Company Stock Fund,” in accordance with
individual participants’ investment elections.
(Compl. ¶ 44; see also SIP Plan Doc.
art. 9.1(b) (“Contributions and all other
funds credited to Member Accounts under
the [SIP] shall be invested in the Investment
Funds provided for under the Plan.”).)
Thus, each participant had control over the
composition and size of their investments in
the specific investment options presented by
the SIP.
During this time, UBS offered its
employees several retirement benefit plans,
including the UBS Savings and Investment
Plan (the “SIP”).3 (Compl. ¶¶ 38–48.) The
SIP, which is an “individual account” plan
governed by ERISA, “provides for
individual accounts for each Participant and
for benefits based solely upon the amount
contributed to the Participants’ account, and
any income, expenses, gains and losses, and
any forfeitures of accounts of other
Participants which may be allocated to such
Participants’ accounts.”
(Compl. ¶ 41
(emphasis added).) Thus, a participant’s
“retirement benefits provided by the SIP are
based solely on the amounts allocated to
each individual’s account.” (Compl. ¶ 41
(emphasis added).)
The UBS Company Stock Fund – which
“tracked the performance of underlying
common stock of UBS” (Compl. ¶ 2) – was
offered as an investment option to SIP
participants throughout the putative class
period4 despite UBS’s lack of diversification
and heavy investment in RMBS and CDOs.
(Compl. ¶¶ 2, 4.) Under the terms of the
SIP, the SIP Committee was also
empowered to amend the menu of
investment options by eliminating an
existing choice and/or adding new options.
(SIP Plan Doc. art. 9.2.) Because the SIP
offered the UBS Company Stock Fund as an
memorandum of law in opposition (Doc. No. 86
(“Opp’n”)), Defendants’ reply memorandum of law
(Doc. No. 88 (“Reply”)), and the documents
submitted in support thereof (Doc. Nos. 85, 87).
The Amended Complaint also included claims – not
relevant to the instant motion – against another
employee benefit plan offered by UBS during the
class period. (See, e.g., Compl. ¶ 57.)
3
4
The putative class period spans from March 13,
2007 until October 16, 2008. (Compl. ¶ 2.)
2
investment option to UBS employees, it is
termed an employee stock ownership plan
(“ESOP”).
liability against UBS, the Board, and the SIP
Committee (Count V). (See Doc. No. 77.)5
On June 7, 2013, after the Second
Circuit vacated the dismissal of Plaintiff’s
claims against the SIP, the Court granted
Plaintiff leave “to amend the current
Amended Complaint by shortening the
putative class period.” (Doc. No. 77 at 2.)
Plaintiff did not avail herself of this option.
Defendants then moved to dismiss the
remaining SIP-related claims on July 22,
2013 and submitted a memorandum in
support of their motion on the same day.
(Doc. Nos. 78, 80.)
Before Plaintiff
responded, however, the Court denied the
motion without prejudice to renewal, noting
that similarly situated appellants in a
separate action before the Second Circuit –
Rinehart v. Akers, No. 11-4232 (2d Cir.) –
had petitioned the Second Circuit for a
rehearing in that case and that resolution of
that motion for rehearing could be
informative in the instant case. (Doc. No.
82.) Following the Second Circuit’s denial
of the petition for rehearing in Rinehart v.
Akers, Defendants timely filed a renewed
motion to dismiss the remaining claims
against the SIP on September 25, 2013.
(Doc. No. 83.) The motion was fully
submitted on November 8, 2013. (Doc.
Nos. 86–88.)
B. Procedural History
Plaintiff filed the initial complaint on
behalf of herself and all others similarly
situated on July 28, 2008. (Doc. No. 1.)
Plaintiff’s complaint was then consolidated
with those of three other plaintiffs, and an
Amended Complaint was filed on November
14, 2008, alleging that Defendants breached
their duties to the SIP by failing to eliminate
the UBS Company Stock Fund from the
menu of investments at the time of the
financial crisis. (See Doc. No. 22.) On
March 24, 2011, the Court granted
Defendants’ motion to dismiss the Amended
Complaint in its entirety pursuant to Rule
12(b)(6) of the Federal Rules of Civil
Procedure (see March 24 Order) and, on
March 23, 2012, denied Plaintiffs’ motions
to alter the judgment or amend the Amended
Complaint (see Doc. No. 69 (the “March 23
Order”)). On appeal, the Second Circuit
affirmed the dismissal of claims related to
another UBS employee benefits plan – the
UBS Financial Services Inc. 401(k) Plus
Plan (the “Plus Plan”) – but vacated the
dismissal of Plaintiff’s claims related to the
SIP, remanding the case to this Court. See
Taveras v. UBS AG, 708 F.3d 436, 446 (2d
Cir. 2013) (holding that claims against the
SIP were improperly dismissed because this
Court applied a presumption of prudence to
the SIP-related claims). Thus, the following
claims brought solely by Plaintiff Taveras
remain before the Court: breach of the
duties of prudence and loyalty against UBS,
the Board, and the SIP Committee (Count I);
breach of the duty to monitor against UBS
and the Board (Count III); and co-fiduciary
On June 26, 2014, the Court received a
letter from Defendants informing the Court
of the Supreme Court’s recent decision in
Fifth Third Bancorp v. Dudenhoeffer, 134 S.
Ct. 2459 (2014), and discussing the
decision’s potential impact on the instant
motion to dismiss.
(Doc. No. 89.)
Plaintiff’s counsel responded to Defendants’
Although the Second Circuit vacated the Court’s
dismissal of Counts I, III, V, and VI as to the SIPrelated claims, see Taveras, 708 F.3d at 444–47,
Plaintiff has since abandoned Count VI, which
sought quantum meruit relief (see Opp’n at 1 n.2).
5
3
letter on July 11, 2014 and, inter alia,
sought leave to move on behalf of the Plus
Plan Plaintiffs for relief, pursuant to Rule
54(b), from the Court’s dismissal of the Plus
Plan claims in light of the Supreme Court’s
decision in Dudenhoeffer. (Pl. Pre-Motion
Letter, July 11, 2014, Doc. No. 90 (“Pl.
PML”).)6 Defendants replied on July 16,
2014. (Doc. No. 91.) At a conference on
August 7, 2014, the Court deemed the Plus
Plan Plaintiffs’ Rule 54(b) motion made and
denied it; the Court also scheduled oral
argument for September 3, 2014 on the
instant motion to dismiss. (Doc. No. 96.)
Thereafter, the Plus Plan Plaintiffs moved
for reconsideration of that denial or, in the
alternative, certification for interlocutory
appeal. (Doc. Nos. 98, 99.) Prior to oral
argument on September 3, 2014, the Court
denied the Plus Plan Plaintiffs’ motion for
reconsideration
or
certification
for
interlocutory appeal. (Transcript of Oral
Argument, Sept. 3, 2014, Doc. No. 103
(“Oral Arg. Tr.”) at 2:7–21.)
concludes that Plaintiff lacks standing, the
Court need not, and in fact may not, address
Defendants’ Rule 12(b)(6) arguments. See
Steel Co. v. Citizens for a Better Env’t, 523
U.S. 83, 94 (1998) (“Jurisdiction is power to
declare the law, and when it ceases to exist,
the only function remaining to the court is
that of announcing the fact and dismissing
the cause.” (quoting Ex parte McCardle, 74
U.S. 506, 514 (7 Wall. 506) (1868) (internal
quotation marks omitted))).
“A case is properly dismissed for lack of
subject matter jurisdiction under Rule
12(b)(1) when the district court lacks
the . . . constitutional power to adjudicate
it.” Makarova v. United States, 201 F.3d
110, 113 (2d Cir. 2000). Accordingly, Rule
12(b)(1) is the proper procedural vehicle for
challenges to a plaintiff’s standing to sue.
Alliance For Envtl. Renewal, Inc. v.
Pyramid Crossgates Co., 436 F.3d 82, 87–
88 (2d Cir. 2006). As the party “seeking to
invoke the subject matter jurisdiction of
the . . . court,” the plaintiff bears the burden
of demonstrating the court’s jurisdiction
over its claim. Scelsa v. City Univ. of N.Y.,
76 F.3d 37, 40 (2d Cir. 1996). In deciding a
motion to dismiss pursuant to Rule 12(b)(1),
a “court may resolve the disputed
jurisdictional fact issues by referring to
evidence outside the pleadings, such as
affidavits . . . .” Zappia Middle E. Constr.
Co. v. Emirate of Abu Dhabi, 215 F.3d 247,
253 (2d Cir. 2000).
Thus, the motions remaining before the
Court are Defendants’ motion to dismiss
Plaintiff Taveras’s remaining claims and
Plaintiff Taveras’s motion to amend.
II. LEGAL STANDARD
A. Motion to Dismiss
Defendants move to dismiss the
remaining claims of the Amended
Complaint for lack of standing and failure to
state a claim under Federal Rules of Civil
Procedure
12(b)(1)
and
12(b)(6),
respectively. However, because the Court
B. Motion to Amend
Rule 15(a)(2) permits a party to amend
its pleading “only with the opposing party’s
written consent or the court’s leave.” Fed.
R. Civ. P. 15(a)(2). While generally “[t]he
court should freely give leave when justice
so requires,” id., there are times when
granting such leave may be inappropriate,
Dluhos v. Floating & Abandoned Vessel,
Known as “New York”, 162 F.3d 63, 69 (2d
6
In the July 11, 2014 letter, Plaintiff Taveras also
sought leave to amend the Amended Complaint
“in light of the Supreme Court’s recent ruling
in . . . Dudenhoeffer” pursuant to Rule 15(a). (Pl.
PML at 1.) The Court deems the motion to amend
made and will address it in section III.B infra.
4
Cir. 1998) (“[A] motion to amend should be
denied if there is an apparent or declared
reason – such as undue delay, bad faith or
dilatory motive[], repeated failure to cure
deficiencies by amendments previously
allowed, undue prejudice to the opposing
party by virtue of the allowance of the
amendment, [or] futility of amendment.”
(alterations in original) (citation and internal
quotation marks omitted)). The Second
Circuit has cautioned that “Rule 15(a)’s
liberal amendment policy should not be
employed in a way that is contrary to the
philosophy favoring finality of judgments
and the expeditious termination of
litigation.” Ruotolo v. City of N.Y., 514 F.3d
184, 191 (2d Cir. 2008) (citation and
internal quotation marks omitted).
grants Defendants’ motion to dismiss. Next,
the Court addresses Plaintiff’s motion to
amend pursuant to Rule 15(a)(2), finding
that granting leave to amend at this stage of
the litigation is not warranted.
A. Standing
Article III of the United States
Constitution limits the jurisdiction of federal
courts to the resolution of “[c]ases” and
“[c]ontroversies.” U.S. Const. art. III, § 2;
see also City of L.A. v. Lyons, 461 U.S. 95,
101 (1983) (“It goes without saying that
those who seek to invoke the jurisdiction of
the federal courts must satisfy the threshold
requirement imposed by Article III of the
Constitution by alleging an actual case or
controversy.” (citations omitted)).
One
aspect
of
this
case-or-controversy
requirement is that the party invoking the
jurisdiction of the federal judiciary establish
“standing” to sue. Raines v. Byrd, 521 U.S.
811, 818 (1997).
“While pleading is not a game of skill in
which one misstep may be decisive to the
outcome, neither is it an interactive game in
which plaintiffs file a complaint, and then
bat it back and forth with the Court over a
rhetorical net until a viable complaint
emerges.” In re Refco Capital Mkts., Ltd.
Brokerage Customer Sec. Litig., Nos. 06-cv643, 07-cv-8686, 07-cv-8688 (GEL), 2008
WL 4962985, at *2 (S.D.N.Y. Nov. 20,
2008) (citations and internal quotation
marks omitted). To grant leave to amend
after a plaintiff has had ample opportunity to
amend “would be condoning a strategy
whereby plaintiffs hedge their bets by
holding . . . evidence back in the hopes of
having another bite at the proverbial apple.”
In re Crude Oil Commodity Litig., No. 06cv-6677 (NRB), 2007 WL 2589482, at *3
(S.D.N.Y. Sept. 7, 2007) (citation and
internal quotation marks omitted).
Standing consists of three “irreducible”
constitutional elements: (1) an “injury in
fact,” defined as “an invasion of a legally
protected interest which is (a) concrete and
particularized and (b) actual or imminent,
not conjectural or hypothetical”; (2) “a
causal connection between the injury and the
conduct complained of – the injury has to be
fairly traceable to the challenged action of
the defendant, and not the result of the
independent action of some third party not
before the court”; and (3) a showing that it is
“likely, as opposed to merely speculative,
that the injury will be redressed by a
favorable decision.” Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560–61 (1992)
(alterations, citations, and internal quotation
marks omitted). “The party invoking federal
jurisdiction bears the burden of establishing
these elements . . . with the manner and
degree of evidence required at the
successive stages of the litigation.” Id. at
III. DISCUSSION
The Court turns first to Defendants’
motion to dismiss pursuant to Rule 12(b)(1).
Because Plaintiff lacks standing to assert the
SIP-related claims that remain, the Court
5
561. “[A]t the pleading stage, standing
allegations need not be crafted with precise
detail, nor must the plaintiff prove his
allegations of injury.” Baur v. Veneman, 352
F.3d 625, 631 (2d Cir. 2003).
comply with ERISA . . . , [plaintiffs]
must allege some injury or
deprivation of a specific right that
arose from a violation of that duty in
order to meet the injury-in-fact
requirement. [The plaintiff] cannot
claim that either an alleged breach of
fiduciary duty to comply with
ERISA, or a deprivation of her
entitlement to that fiduciary duty, in
and of themselves constitutes an
injury-in-fact
sufficient
for
constitutional standing.
These
constitutional
standing
requirements necessarily extend to claims
brought by a retirement plan participant
suing under ERISA. Such a plaintiff “must
establish . . . constitutional standing,
meaning the plan participant must . . . assert
a constitutionally sufficient injury arising
from the breach of a statutorily imposed
duty.” Kendall v. Emps. Ret. Plan of Avon
Prods., 561 F.3d 112, 118 (2d Cir. 2009)
(citation omitted). In a putative class action
brought under ERISA, “once standing is
established for a named plaintiff, standing is
established for the entire class.” Id. (citing
Cent. States Se. & Sw. Areas Health &
Welfare Fund v. Merck-MedCo Managed
Care L.L.C. (Central States II), 504 F.3d
229, 241 (2d Cir. 2007)); see also Cent.
States Se. & Sw. Areas Health & Welfare
Fund v. Merck-MedCo Managed Care
L.L.C. (Central States I), 433 F.3d 181, 199
(2d Cir. 2005) (“[T]he named class plaintiffs
‘must allege and show that they personally
have been injured, not that injury has been
suffered by other, unidentified members of
the class to which they belong and which
they purport to represent.” (quoting Warth v.
Selding, 422 U.S. 490, 502 (1975))).
Id. at 121 (emphasis added) (citations
omitted). With respect to actions to obtain
“restitution or disgorgement under ERISA,”
the Second Circuit has made clear that “a
plaintiff satisf[ies] the strictures of
constitutional standing by demonstrating
individual loss.” Central States I, 433 F.3d
at 200 (citation and internal quotation marks
omitted).7
Thus, to demonstrate a
constitutionally justiciable injury under
ERISA, plaintiffs must allege that they
suffered specific losses as a result of the
alleged breach of fiduciary duty.
See
Under ERISA, “[r]equests for restitution
or disgorgement . . . are different from requests for
injunctive relief,” Central States I, 433 F.3d at 200,
and with respect to plaintiffs seeking the latter form
of relief, “a plan participant may have Article III
standing to obtain injunctive relief related to
ERISA’s disclosure and fiduciary duty requirements
without a showing of individual harm to the
participant,” id. at 199. Insofar as Plaintiff’s general
requests for injunctive relief remain viable (see, e.g.,
Am. Compl. Prayer for Relief ¶¶ E, F), the Court
finds that because she is no longer a participant in the
SIP (see Giuffra Decl. Ex. 1 (“Trading History” or
“Trad. Hist.”)), she lacks standing to pursue those
remedies. See, e.g., Deshawn E. ex rel. Charlotte E.
v. Safir, 156 F.3d 340, 344 (2d Cir. 1988) (“A
plaintiff seeking injunctive or declaratory relief
cannot rely on past injury to satisfy the injury
requirement but must show a likelihood that he or she
will be injured in the future.” (citing Lyons, 461 U.S.
at 105–106)).
7
In Kendall, the Second Circuit rejected
the plaintiff’s argument that “she need not
show individualized harm as a[n ERISA
p]lan participant under [29 U.S.C.]
§ 1132(a)[]
to
assert
constitutional
standing . . . .” 561 F.3d at 118. The
Second Circuit reasoned:
[Alleging breach to show deprivation
of a right to be free from breach] is
obviously circular.
While plan
fiduciaries have a statutory duty to
6
Complaint does not allege whether – let
alone when – Plaintiff, through the SIP,
purchased shares of the UBS Company
Stock Fund or when she sold those shares or
the amounts of those investments. Nor does
it provide any basis whatsoever for
connecting Plaintiff’s purported losses to the
fiduciaries’ alleged breaches.
Kendall, 561 F.3d at 119–20 (dismissing
plaintiff’s ERISA damages claim for lack of
standing when plaintiff failed to demonstrate
financial loss in addition to allegations of
defendant’s breach of fiduciary duty); see
also Donoghue v. Bulldog Investors Gen.
P’ship, 696 F.3d 170, 178 (2d Cir. 2012)
(interpreting Kendall as holding that alleged
violations of public rights created by ERISA
are insufficient Article III injuries-in-fact in
actions for money damages absent a
showing of individualized harm).
Significantly, this is not a case where
any diminution in the value of the SIP’s
assets would necessarily impact the value of
each SIP participant’s account. As set forth
in the Amended Complaint, SIP participants
directed the SIP to make investments on
their behalf by choosing from a menu of
investment options selected by the SIP’s
fiduciaries. (See Compl. ¶ 42.) In turn, the
SIP used funds from the participant’s
account to purchase shares in accordance
with the participant’s directives.
(See
Compl. ¶¶ 41–42.) Consequently, since a
participant’s “retirement benefits provided
by the SIP are based solely on the amounts
allocated to each individual’s account,”
each participant’s individual SIP account
was comprised of only the investments they
personally selected. (Compl. ¶ 41 (emphasis
added); see also Oral Arg. Tr. at 66:8–10
(“The individual participants merely
contribute money to the plan[], and then
instruct the [administrators of the plan] how
those plan investments are to be
allocated.”).) It necessarily follows that
Plaintiff
can
only
demonstrate
a
constitutionally sufficient injury by pointing
to her individual account’s specific losses
during the class period. Given the nature of
the SIP, Plaintiff cannot indirectly establish
an injury-in-fact simply by claiming that the
SIP itself suffered losses.
Defendants argue that Plaintiff lacks
standing to bring her claims in federal court
since the Amended Complaint makes no
allegations
demonstrating
Plaintiff’s
individual loss. (Mem. at 25; Reply at 10.)
The Court agrees. In the 83-page Amended
Complaint, there are only two paragraphs
that, when read in conjunction, purport to
allege an injury-in-fact sustained by
Plaintiff. The first, paragraph 12, states
flatly that “Plaintiff is a former UBS
employee and is a participant in the SIP.”
(Compl. ¶ 12.) The second, paragraph 236,
states: “As a direct and proximate result of
the breaches of fiduciary duties alleged
herein, the Plan[], and indirectly Plaintiff[]
and the Plan[’s] other Participants and
beneficiaries, lost a significant portion of
[its] investments meant to help Participants
save for retirement.” (Compl. ¶ 236.) At
oral argument, Plaintiff conceded that the
Amended Complaint lacks any other
allegations that touch upon a constitutionally
cognizable injury. (See Oral Arg. Tr. at
19:13–23 (“THE COURT: [Paragraph] 236
is really . . . it, right? MR. RIFKIN: And
that is it. And what we say in paragraph
236, which is a relatively simple,
straightforward paragraph, we say that the
plan has been injured, and the individual
participants have been indirectly injured as a
result of the breaches of fiduciary duty that
are
enumerated
elsewhere
in
the
complaint.”).)
Thus, the Amended
Plaintiff disputes this conclusion and
contends that an individual plaintiff need
only “allege some interest in the recovery by
the plan” (Oral Arg. Tr. at 20:18), relying on
legal authority suggesting that an ERISA
7
SIP’s fiduciaries to present investment
options to the SIP participants. Thus, the
SIP could not sustain plan losses that would
necessarily injure each participant. In this
context, where the SIP’s participants made
their own investment decisions about their
individual accounts, albeit based on options
selected by the SIP fiduciaries, the Second
Circuit’s clear command in Kendall requires
Plaintiff to allege that she did, in fact, suffer
an individualized harm through her
investment in the UBS Company Stock
Fund. In fact, the plaintiff in Kendall had
brought suit under 29 U.S.C. § 1132(a) – the
same provision under which Plaintiff has
brought suit (see Compl. ¶ 236) – and the
Second Circuit found the plaintiff’s
assertion that she need not show
individualized harm under § 1132(a) to be
“a clear misstatement of law,” 561 F.3d at
119; see also Donoghue, 696 F.3d at 178
(“[In Kendall,] we held that an ERISA
plaintiff bringing a disgorgement claim
could not satisfy the injury requirement of
standing by alleging defendant’s general
breach of fiduciary duty under ERISA
without a showing of individualized harm.”
(citation and internal quotation marks
omitted)).
Once again, the Amended
Complaint contains no such allegation and
merely relies on a general theory that all SIP
participants were “indirectly injured if they
had UBS stock in their plan accounts during
the class period.” (Oral Arg. Tr. at 21:16–
18; see also id. at 21:19–21 (“If the plan lost
money on the UBS stock fund investment,
then they lost money on the UBS stock fund
investment.”).) As pleaded, the Amended
Complaint contains no facts as to whether or
when Plaintiff directed the SIP to purchase
or sell shares of the UBS Company Stock
Fund on her behalf, and therefore provides
no basis from which an injury-in-fact can be
inferred.
plan participant need not show a direct,
individualized injury to establish standing
(Oral Arg. Tr. at 20:14–16 (“[A]ll of the
cases that are relevant and germane and talk
about damages in an ERISA case, talk about
harm to the plan, as opposed to harm to
individuals.”); id. at 37:7–10 (“All of these
cases . . . , all of them look at damages at the
plan level, not at the individual investor
level.”)). But that reliance is misplaced,
since those decisions involved ERISA plans
that managed assets on behalf of plan
participants, with each participant’s
financial fortune tied to the plan’s overall
success (or failure). For instance, Donovan
v. Bierwirth, on which Plaintiff principally
relies, involved an ERISA plan that
empowered the plan trustees to actively
select and manage the plan’s assets on
behalf of the participants. See 754 F.2d
1049, 1051–52 (2d Cir. 1985). Under this
type of plan, each participant would
necessarily be harmed by any losses
sustained by the plan as a result of a breach
of fiduciary duty. Similarly, the ERISA
plan in Dardaganis v. Grace Capital Inc.
empowered a registered investment advisor
to “manage the [plan’s a]ccount” subject to
certain specified guidelines regarding the
“proportion of fund assets that . . . could [be]
invest[ed] in common stocks.” 889 F.2d
1237, 1239 (2d Cir. 1989). Once again, the
breach of fiduciary duty alleged in that case
necessarily caused the value of the plan to
diminish, to the detriment of all plan
participants. See also L.I. Head Start Child
Develop. Servs., Inc. v. Econ. Opportunity
Comm’n of Nassau Cnty., Inc., 710 F.3d 57,
67 n.5 (2d Cir. 2013) (finding constitutional
standing on the basis of derivative injury in
case involving ERISA welfare benefits plan
managed on behalf of participants).
Here, by contrast, the ERISA plan at
issue – the SIP – did not involve the direct
and active management of the participants’
assets, but instead simply empowered the
Forced to acknowledge the dearth of
facts contained in the Amended Complaint
8
(Oral Arg. Tr. at 19:8–23), Plaintiff weakly
asserted for the first time at oral argument
that Plaintiff’s Trading History – which
Defendants included as an exhibit to a
declaration filed in support of the instant
motion – somehow demonstrates an injuryin-fact stemming from Plaintiff’s investment
in the UBS Company Stock Fund.8 In fact,
the Trading History does no such thing. The
contents of the “Amount” column in the
document are redacted, thereby omitting
critical information concerning the number
of shares involved in each transaction listed.
In addition, the “Activity Description”
column does not identify the specific
investment funds involved in each
transaction.
As a whole, the Trading
History sheds little light, if any, on
Plaintiff’s investment in the UBS Company
Stock Fund and provides no basis
whatsoever for the Court to infer an injuryin-fact flowing from that investment,
particularly in light of the absence of any
facts pleaded in the Amended Complaint
that would support such an inference.9
In sum, the Court finds that Plaintiff
lacks standing to sue under ERISA because
she has not alleged the existence of a
constitutionally
cognizable
injury.
Consequently, Plaintiff’s failure to “satisfy
the strictures of constitutional standing by
demonstrating individual loss” deprives the
Court of jurisdiction. Central States I, 433
F.3d at 200 (citation and internal quotation
marks omitted).
B. Motion for Leave to Amend
In a letter to the Court dated July 11,
2014, Plaintiff sought leave to make a Rule
15(a) motion to file another amended
complaint “in light of the Supreme Court’s
recent ruling in . . . Dudenhoeffer.”
(Pl.
PML at 1.) For the reasons that follow, the
Court deems Plaintiff’s motion made and
denies it.
First, it should be noted that this motion
“would not be Plaintiff[’s] first opportunity
to amend [her] complaint . . . [as] Plaintiff[]
ha[s] filed multiple complaints – at least one
making substantive amendments for
purposes of Rule 15(a) analysis . . . .”
(March 23 Order at 7.) The Court has
already denied one such motion to amend
the Amended Complaint, reasoning that “the
time for Plaintiff[] to make a motion to
amend under Rule 15(a) has . . . come and
gone.” (Id.) The Second Circuit affirmed
that denial by the Court. See Taveras v.
UBS AG, 513 F. App’x 19, 22–23 (2d Cir.
2013).10
8
The law is clear that, to the extent that there are
jurisdictional facts in dispute, courts may consider
evidence introduced outside the pleadings when
considering a motion to dismiss for lack of subject
matter jurisdiction. See, e.g., Amidax Trading Grp. v.
S.W.I.F.T. SCRL, 671 F.3d 140, 145–46 (2d Cir.
2011); Morrison v. Nat’l Austl. Bank Ltd., 547 F.3d
167, 170 (2d Cir. 2008), aff’d 561 U.S. 247 (2010);
Zappia Middle East Constr. Co., 215 F.3d at 253.
9
If anything, the Trading History demonstrates that
Plaintiff may have actually benefited from the
artificial inflation that is central to the various
breaches alleged in the Amended Complaint.
According to the Trading History, Plaintiff divested
her entire SIP account of all assets, including
presumably any interest in the UBS Company Stock
Fund, on July 8, 2008. (Trad. Hist. at 4.) This date
of divestiture preceded the end of the putative class
period, which, according to Plaintiff, ran from March
13, 2007 through October 16, 2008. (Compl. ¶ 2.)
Given the nature of the allegations here – whereby
the UBS Company Stock Fund is alleged to have
been vastly inflated as a result of misstatements and
omissions by the Company (Compl. ¶ 86) – the
Trading History suggests that Plaintiff sold her
holdings in the UBS Company Stock Fund while the
share price was still inflated and before corrective
disclosures caused the price to fall back to a level
reflecting its actual value (see Giuffra Decl. Ex. 12
(listing share price history of UBS stock)).
10
As noted above, the Second Circuit did direct the
Court to grant Plaintiff leave to amend in order to
9
Second, Plaintiff’s assertion that the
Supreme Court’s decision in Dudenhoeffer
has changed the landscape for claims arising
under ERISA overshoots the mark. (See Pl.
PML at 2 (“[T]he Supreme Court
unanimously ruled that a ‘presumption of
prudence’ does not apply to a fiduciary’s
decision to invest in company stock in a
retirement plan, thereby fundamentally
altering the pleading standard for ERISA
duty of prudence claims in the Second
Circuit.” (citation omitted)).) In this case,
the Second Circuit already determined that
the presumption of prudence does not apply
to the SIP. As a result, the Supreme Court’s
rejection of the presumption of prudence in
general has little impact on this case in its
present posture.11
Finally,
and
most
significantly,
Plaintiff’s lack of standing to pursue the
SIP-related claims renders any attempt by
Plaintiff to replead in the aftermath of
Dudenhoeffer an exercise in futility. To the
extent that Plaintiff wishes to amend the
complaint to allege new facts to
establish a constitutionally cognizable
injury-in-fact – something Plaintiff has not
articulated – that request is denied. Plaintiff
has had ample opportunity to plead and
replead facts with respect to standing, and
there has certainly been no intervening
change in the law regarding that standard.
Since at least 2005, the Second Circuit has
made clear that “[o]btaining restitution or
disgorgement under ERISA requires that a
plaintiff
satisfy
the
strictures
of
constitutional standing by demonstrat[ing]
individual loss, to wit, that they have
suffered an injury-in-fact.” Central States I,
433 F.3d at 200 (citations and internal
quotation marks omitted). Accordingly, the
Court finds that providing Plaintiff with
another opportunity to amend the operative
pleading would be futile.
shorten the putative class period. Taveras, 513 F.
App’x at 22–23; (see also Doc. No. 77). However,
Plaintiff did not avail herself of that opportunity to
amend. (See Doc. Nos. 77–78.)
It could be argued that the Supreme Court’s
decision in Dudenhoeffer has, if anything, raised the
bar for plaintiffs seeking to bring a claim based on a
breach of the duty of prudence. See 134 S. Ct. at
2471 (“In our view, where a stock is publicly traded,
allegations that a fiduciary should have recognized
from publicly available information alone that the
market was over- or undervaluing the stock are
implausible as a general rule, at least in the absence
of special circumstances.”); id. (“ERISA fiduciaries,
who . . . could reasonably see ‘little hope of
outperforming the market . . . based solely on their
analysis of publicly available information,’ may, as a
general matter, . . . prudently rely on the market
price.” (quoting Halliburton Co. v. Erica P. John
Fund, Inc., 134 S. Ct. 2398, 2411 (2014)).
Notwithstanding the uphill battle Plaintiff’s claims
would face in any adjudication on the merits,
Plaintiff’s lack of standing deprives the Court of
jurisdiction to reach Defendants’ Rule 12(b)(6)
arguments. See Steel Co, 523 U.S. at 94; see also
Harty v. Simon Prop. Grp., L.P., 428 F. App’x 69, 72
(2d Cir. 2011) (“Because the district court dismissed
[the plaintiff’s] claim for lack of standing, however,
it lacked jurisdiction to adjudicate [the defendant’s]
alternative motion to dismiss for failure to state a
claim.” (citation omitted)).
11
IV. CONCLUSION
Because Plaintiff lacks standing to
pursue the claims that remain in this action,
Defendants’ motion to dismiss is granted.
Additionally, because Plaintiff fails to
satisfy the standards for leave to amend
under Rule 15(a), Plaintiff’s motion seeking
leave to amend is denied. The Clerk of the
10
Court is respectfully directed to terminate
the motion located at docket entry 83 and to
close this case.
United States District Judge
Dated: September 29, 2014
New York, New York
*
*
USDSSDNY
DOCUMENT
ELECTRONICALLY FILED
*
Plaintiffs are represented by Mark C.
Rifkin and David Lloyd Wales, Wolf
Haldenstein Adler Freeman & Herz LLP,
270 Madison Avenue, New York, NY
10016; Thomas James McKenna, Gainey
McKenna & Egleston, 440 Park A venue,
South Fifth Floor, New York, New York
10016; and Todd S. Collins, Berger &
Montague, P.C., 1622 Locust Street,
Philadelphia, Pennsylvania 19103.
DOC#:~~~~-.-~~
DATE FILED: q, b_t.r/ti6/t./
,
Defendants are represented by Robert
Joseph Giuffra, Jr., Andrew Paul Giering,
Matthew Alexander Schwartz, Suhana S.
Han, and Thomas Charles White, Sullivan &
Cromwell, LLP, 125 Broad Street, New
York, New York 10004.
11
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?