Boyette et al v. Medical Center et al
MEMORANDUM OPINION AND ORDER re: 35 MOTION to Dismiss Second Amended Complaint. filed by The TDA Plan Committee, Montefiore Medical Center, The Board of Trustees of Montefiore Medical Center, Dr. Michael Stocker. The Court has considered all of the arguments of the parties. To the extent not specifically addressed above, the arguments are either moot or without merit. For the foregoing reasons, the defendants' motion to dismiss is granted. The complaint is dismissed without prejudice to the ability of the plaintiffs to move to file an amended complaint. Any such motion must be filed within thirty days of the date of this Memorandum Opinion and Order and explain how any proposed amended complaint would resolve the defects in the current complaint. If no such motion is filed, the dismissal will be with prejudice. The Clerk is respectfully directed to close ECF No. 35. SO ORDERED. (Signed by Judge John G. Koeltl on 11/13/2023) (tg)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SHEILA A. BOYETTE and TIFFANY
JIMINEZ, individually and on behalf
of all others similarly situated,
- against -
MEMORANDUM OPINION AND
MONTEFIORE MEDICAL CENTER, THE BOARD
OF TRUSTEES OF MONTEFIORE MEDICAL
CENTER, THE TDA PLAN COMMITTEE, DR.
MICHAEL STOCKER, and JOHN DOES 1-30,
JOHN G. KOELTL, District Judge:
The plaintiffs, Sheila A. Boyette and Tiffany Jiminez, bring
this purported class action on behalf of themselves and all others
similarly situated, against the defendants, Montefiore Medical
Center (“Montefiore”), the Board of Trustees of Montefiore Medical
Center (the “Board”), the TDA Plan Committee (the “Committee”),
Dr. Michael Stocker, and John Does 1-30 (collectively, “the
defendants”). The plaintiffs allege that the defendants violated
their fiduciary duty of prudence in violation of the Employment
Retirement Income Security Act (“ERISA”), 29 U.S.C. 1001 et seq.
The defendants now move to dismiss various claims for lack of
standing pursuant to Federal Rule of Civil Procedure 12(b)(1), and
for failure to state a claim pursuant to Federal Rule of Civil
Procedure 12(b)(6). For the following reasons, the defendants’
motion to dismiss is granted.
The following facts are taken from the Second Amended
Complaint, ECF No. 30, unless otherwise noted.
The plaintiffs are former employees of Montefiore who are
participants in the Montefiore Medical Center 403(b) Plan (the
“Plan”). Second Am. Compl. (“SAC”) ¶¶ 20-21. The Plan covers
substantially all eligible employees of Montefiore. Id. ¶¶ 43-44.
From 2017 to 2022, the Plan had over 22,000 participants, id. ¶
11, and at the end of fiscal year 2020, the Plan had over $3.2
billion in assets under management. Id. ¶ 9.
The Plan is a defined contribution plan. Id. ¶ 43. 29 U.S.C.
§ 1002(34) defines a defined contribution plan as a
pension plan which provides for an individual account for
each participant and for benefits based solely upon the
amount contributed to the participant’s account, and any
income, expenses, gains and losses, and any forfeitures of
accounts of other participants which may be allocated to
such participant’s account.
Participants can contribute to their Plan accounts in several
different ways, and Montefiore matches participant contributions
up to a certain percentage. Id. ¶¶ 45-46.
Plaintiff Sheila A. Boyette invested in the Fidelity Freedom
2030 Fund which was mapped to the Principle Life Time 2030 Inst
Fund when the Plan discontinued the Fidelity Freedom Funds. Id. ¶
20. Plaintiff Tiffany Jiminez invested in the BlackRock LifePath
Index 2045 Fund and the MetLife Blended Fund. Id. ¶ 21. The
plaintiffs assert that the substantial amount of assets under the
Plan’s management places it among the largest plans in the United
States, id. ¶¶ 9-10, and that this status affords the Plan
substantial bargaining power to negotiate favorable recordkeeping
fees and management fees. Id. ¶¶ 12-13.
The Committee is the named fiduciary under the Plan with the
responsibility to select and monitor the investment alternatives
available for participant-directed investment. Id. ¶ 32.
Montefiore, acting through the Board, appointed the Committee to,
among other things, ensure that the investments available to Plan
participants were appropriate and that the Plan paid a fair price
for recordkeeping services. Id. ¶ 28.
Fidelity Investments (“Fidelity”) and Principal Financial
Group (“Principal”) serve as the Plan’s recordkeepers. Id. ¶ 88.
“Recordkeeping” refers to “the suite of administrative services
typically provided to a defined contribution plan by the plan’s
‘recordkeeper.’” Id. ¶ 64. Recordkeeping expenses “can either be
paid directly from plan assets, or indirectly by the plan’s
investments in a practice known as revenue sharing.” Id. ¶ 74. The
cost of providing recordkeeping services “often depends on the
number of participants in a plan,” id. ¶ 69, and thus, “[p]lans
with large numbers of participants can take advantage of economies
of scale by negotiating a lower per-participant recordkeeping
fee.” Id. ¶ 71. While the “vast majority of plans” charge
recordkeeping expenses on a per-participant basis, id., the Plan
employs an asset-based fee schedule whereby recordkeeping fees are
charged as a percentage of each participant’s account balance. Id.
¶¶ 20-21, 92.
The plaintiffs allege that the recordkeeping costs for the
Plan were higher than those of comparable peer plans. From 2017 to
2020, the Plan’s recordkeeping cost per participant is alleged to
have ranged from $136.51 to $230.25 with revenue sharing, and
$136.51 to $172.70 without revenue sharing. Id. ¶¶ 98-99. The
plaintiffs compare these figures to those of other plans with at
least 15,000 participants and $300 million dollars in assets under
management, for which the recordkeeping cost per participant
allegedly ranged from $23 to $30. Id. ¶ 105. Inferring from these
benchmarks, the plaintiffs allege that the Plan “should have been
able to negotiate a recordkeeping cost anywhere in the mid $20
range per participant from the beginning of the Class Period to
the present.” Id. ¶ 107. In addition to comparing the Plan’s perparticipant recordkeeping fees with those of similarly sized
plans, the plaintiffs rely on a stipulation by Fidelity in another
case to support their inference that the defendants could have
negotiated recordkeeping fees in the range of reasonableness they
identify. Id. ¶¶ 109-13.
The plaintiffs allege that part of a fiduciary’s duty to
remain informed about overall trends in the recordkeeping fee
marketplace includes conducting a Request for Proposal (“RFP”)
process at “reasonable intervals, and immediately if the plan’s
recordkeeping expenses have grown significantly or appear high in
relation to the general marketplace.” Id. ¶ 78. The plaintiffs
allege that, because the Plan “paid astronomical amounts for
recordkeeping during the Class Period, there is little to suggest
that Defendants conducted an RFP at reasonable intervals . . . to
determine whether the Plan could obtain better recordkeeping and
administrative fee pricing from other service providers.” Id. ¶
In addition to recordkeeping costs, each of the funds offered
by the Plan has an associated maintenance and monitoring fee. This
fee is referred to as the “expense ratio,” and is the amount paid
by a plan’s participant relative to the percentage of assets held
by that participant in the fund. The plaintiffs allege that “a
fiduciary to a large defined contribution plan such as the Plan
can use its asset size and negotiating power to invest in the
cheapest share class available. . . . [P]rudent retirement plan
fiduciaries will search for and select the lowest-priced share
class available.” Id. ¶ 117.
The plaintiffs allege two related, but distinct, claims
regarding the expense ratios charged against participants’
investments. First, they allege that the Plan failed to “identify
and utilize available lower-cost share classes of many of the
funds in the Plan.” Id. ¶ 114. The plaintiffs identify five funds
for which there was a less expensive counterpart. 1 The plaintiffs
claim that “the more expensive share classes chosen by Defendants
were the same in every respect other than price to their less
expensive counterparts,” id. ¶ 123, and that “the Plan did not
receive any additional services or benefits based on its use of
more expensive share classes; the only consequence was higher
costs for the Plan’s participants.” Id. ¶ 122. The plaintiffs
assert: “A prudent fiduciary conducting an impartial review of the
Plan’s investments would have identified the cheaper share classes
available and transferred the Plan’s investments in the abovereferenced funds into the lower share classes at the earliest
opportunity,” id. ¶ 121. Instead, the plaintiffs contend, the
defendants failed to monitor the Plan prudently to determine
whether it was invested in the lowest-cost share class available
for its funds. Id. ¶ 120.
The funds in the Plan are the MFS Value R3, PGIM High Yield Z,
Vanguard Total Intl Stock Index Admiral, BNY Mellon International
Bond I, and Metropolitan West Total Return Bd I funds. SAC ¶ 120.
The corresponding “less expensive share class” funds are the MFS
Value R6, PGIM High Yield R6, Vanguard Total Intl Stock Index I,
BNY Mellon International Bond Y, and Metropolitan West Total
Return Bd Plan funds, respectively. Id.
Second, the plaintiffs allege that the Plan failed to replace
“higher cost and underperforming” funds with “superior performing
less expensive alternatives.” Id. ¶¶ 130, 132. The plaintiffs
identify five underperforming funds and compare them to five
purportedly lower-cost, better-performing alternatives. 2 Id. ¶ 133.
The plaintiffs argue that a prudent fiduciary should have been
aware of these alternatives and switched to them at the beginning
of the Class Period. “Failure to do so is a clear indication that
the Plan lacked any prudent process whatsoever for monitoring the
cost and performance of the funds in the Plan.” Id. ¶ 139.
At the outset, the Court notes that it recently dismissed a
substantially similar case alleging a breach of the fiduciary duty
of prudence in violation of ERISA. See Singh v. Deloitte LLP, 650
F. Supp. 3d 259 (S.D.N.Y. 2023). The plaintiffs in Singh alleged
that the retirement plans offered by the defendants were managed
imprudently because their recordkeeping fees were excessive in
relation to the services rendered, and the expense ratios charged
by the plans’ funds were unreasonably excessive. Id. at 266-68.
The underperforming funds in the Plan are the Janus Henderson
Small Cap Value N, PGIM Jennison Growth Z, MFS Value R3, Dodge &
Cox International Stock, and BNY Mellon International Bond I
funds. Their “superior performing alternatives” are the DFA US
Targeted Value I, American Century Investments Focused Dynamic
Growth Fund R6 Class, Vanguard Equity-Income Adm, Bridge Builder
International Equity, and PIMCO International Bond (Unhedged)
Instl funds, respectively. Id. ¶¶ 133-34.
This Court granted the defendants’ motion to dismiss for lack of
subject matter jurisdiction under Rule 12(b)(1) with respect to a
plan in which the plaintiffs did not participate, and with respect
to individual funds in which they did not participate. The Court
also dismissed the plaintiffs’ claims with respect to two funds in
which they did participate for failure to state a claim. The
plaintiffs have avoided distinguishing Singh in any way, and many
of the reasons that required dismissal in Singh require dismissal
of this case.
When presented with motions under Rule 12(b)(1) to dismiss
for lack of subject matter jurisdiction and Rule 12(b)(6) to
dismiss for failure to state a claim upon which relief can be
granted, the Court should consider the jurisdictional challenge
first. See Rhulen Agency, Inc. v. Ala. Ins. Guar. Ass’n, 896 F.2d
674, 678 (2d Cir. 1990). 3
The defendants first move to dismiss for lack of subject
matter jurisdiction, arguing that the plaintiffs lack standing
because the plaintiffs fail to plead that they paid excessive
recordkeeping fees and have not alleged participation in the
Plan’s funds charging allegedly excessive expense ratios. To
Unless otherwise noted, this Memorandum Opinion and Order omits
all alterations, citations, footnotes, and internal quotation
marks in quoted text.
prevail against a motion to dismiss for lack of subject matter
jurisdiction, the plaintiff bears the burden of proving the
Court’s jurisdiction by a preponderance of the evidence. Makarova
v. United States, 201 F.3d 110, 113 (2d Cir. 2000). In considering
such a motion, the Court generally must accept the material
factual allegations in the complaint as true. See J.S. ex rel.
N.S. v. Attica Cent. Schs., 386 F.3d 107, 110 (2d Cir. 2004).
However, the Court does not draw all reasonable inferences in the
plaintiff’s favor. Id. Indeed, where jurisdictional facts are
disputed, the Court has the power and the obligation to consider
matters outside the pleadings to determine whether jurisdiction
exists. See Kamen v. Am. Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d
Cir. 1986). In so doing, the Court is guided by that body of
decisional law that has developed under Rule 56. See id.
Article III standing requires a party to show that (1) the
party has suffered an actual or imminent injury in fact, which is
concrete and particularized; (2) there is a causal connection
between the injury and conduct complained of; and (3) it is likely
that a favorable decision in the case will redress the injury.
Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992). “The
party invoking federal jurisdiction bears the burden of
establishing these elements.” Id. at 561.
First, the defendants argue that the plaintiffs lack standing
with respect to their claim alleging excessive recordkeeping fees.
Injury-in-fact requires the plaintiffs to show that they have
suffered an actual or imminent injury that is concrete and
particularized as to the plaintiffs. Lujan, 504 U.S. at 560. The
plaintiffs, however, fail to plead that they, themselves, paid the
excessive fees they allege.
The Plan employs an asset-based recordkeeping fee schedule.
SAC ¶¶ 20-21. Thus, recordkeeping fees are charged as a percentage
of each participant’s account balance and vary by individual. The
plaintiffs’ argument as to the unreasonableness of the Plan’s
recordkeeping fees is based on the comparison between what the
plaintiffs purport to be the Plan’s per-participant fees and a
“reasonable” range of fees charged by similarly sized plans. Id. ¶
105. But this argument fails because the plaintiffs fail to plead
the recordkeeping fees each of them actually paid. The actual fees
a participant pays will depend on the size of the participant’s
account -- the smaller the account, the lower the fees. A
participant’s fees may be well below the range of reasonableness
advanced by the plaintiffs, depending on the participant’s account
balance. The plaintiffs allege that they suffered injury by
“continuing to pay [their] share of the overly expensive
[recordkeeping] costs through the asset based charge” applied to
their investments, id. ¶¶ 20-21, but without setting forth what
they individually paid each year in recordkeeping fees, they
cannot allege that the fees they paid were unreasonable or outside
the range of reasonableness set forth in the SAC. Because they
fail to plead a cognizable injury for Article III standing on
their recordkeeping fees claim, the claim must be dismissed.
The plaintiffs also lack standing with respect to their
claims challenging the funds that charged excessive expense
ratios, because the plaintiffs did not invest in these funds.
In a defined contribution plan such as the one at issue, “a
plan participant’s benefit is determined entirely by that
participant’s individual contributions to their own plan and in
which the participants direct the investment of their
contributions into various investment options offered by the
plan.” Singh, 650 F. Supp. 3d at 265. It follows, then, that the
plaintiffs may not complain about poorly performing funds unless
the plaintiffs invested in those funds, because they are not
otherwise harmed. Id. (“[A] plan participant who does not invest
their plan assets into a particular fund offered in a defined
contribution plan will not have their individual plan benefit
affected in any way by that fund’s performance or associated
fees.”); see also Taveras v. UBS AG, 612 F. App’x 27, 29 (2d Cir.
2015); In re Omnicom ERISA Litig., No. 20-cv-4141, 2021 WL
3292487, at *9 (S.D.N.Y. Aug. 2, 2021); Patterson v. Morgan
Stanley, No. 16-cv-6568, 2019 WL 4934834, at *5 (S.D.N.Y. Oct. 7,
2019). Neither of the plaintiffs invested in any of the five funds
for which the plaintiffs have alleged that there were available
lower-cost share classes. Compare SAC ¶¶ 20-21, with id. ¶ 120.
Moreover, neither of the plaintiffs invested in the five
underperforming funds that the plaintiffs have identified. Compare
id. ¶¶ 20-21, with id. ¶ 133. Because the plaintiffs have failed
to show that the challenged funds in which they did not invest
caused them any particularized injury, the plaintiffs lack
standing to assert their excessive expense ratio claims.
Therefore, in this case, the plaintiffs lack standing to
assert their claims that they paid excessive recordkeeping
charges. They also lack standing to assert their claims that the
funds in which the Plan invested had excessive expense ratios or
were underperforming funds because the plaintiffs did not invest
in any of those funds. This is sufficient to dismiss the
plaintiffs’ complaint. However, for the sake of completeness, the
Court explains why the plaintiffs have also failed to state a
claim pursuant to Rule 12(b)(6).
In deciding a Rule 12(b)(6) motion to dismiss, the
allegations in the complaint are accepted as true, and all
reasonable inferences must be drawn in the plaintiffs’ favor.
McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir.
2007). The Court’s function on a motion to dismiss is “not to
weigh the evidence that might be presented at a trial but merely
to determine whether the complaint itself is legally sufficient.”
Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). The Court
should not dismiss the complaint if the plaintiff has stated
“enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A
claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009).
While the Court should construe the factual allegations in
the light most favorable to the plaintiff, “the tenet that a court
must accept as true all of the allegations contained in the
complaint is inapplicable to legal conclusions.” Id. When
presented with a motion to dismiss pursuant to Rule 12(b)(6), the
Court may consider documents that are referenced in the complaint,
documents that the plaintiff relied on in bringing suit and that
are either in the plaintiff’s possession or that the plaintiff
knew of when bringing suit, or matters of which judicial notice
may be taken. See Chambers v. Time Warner,
Inc., 282 F.3d 147, 153 (2d Cir. 2002).
To state a claim for breach of fiduciary duty under ERISA,
the plaintiff must allege that “(1) the defendant was a fiduciary
who (2) was acting in a fiduciary capacity, and (3) breached his
fiduciary duty.” Cunningham v. USI Ins. Servs., LLC, No. 21-cv1819, 2022 WL 889164, at *2 (S.D.N.Y. Mar. 25, 2022). The
defendants do not dispute that they were fiduciaries of the Plan
acting in their fiduciary capacity. The defendants claim only that
they did not breach their fiduciary duty of prudence to the
ERISA imposes a duty of prudence upon plan fiduciaries,
directing them to make reasonable investment and managerial
decisions “with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use.” 29 U.S.C. §
1104(a)(1)(B). The duty of prudence “is measured according to the
objective prudent person standard developed in the common law of
trusts,” and a fiduciary’s actions are judged “based upon
information available to the fiduciary at the time of each
investment decision and not from the vantage point of hindsight.”
Pension Benefit Guar. Corp. ex rel. Saint Vincent Cath. Med. Ctrs.
Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 716 (2d
Cir. 2013). The focus is “on a fiduciary’s conduct in arriving at
an investment decision, not on its results, and asks whether a
fiduciary employed the appropriate methods to investigate and
determine the merits of a particular investment.” Id. “In other
words, courts analyze a fiduciary’s process to determine prudence,
not outcome.” Ferguson v. Ruane Cunniff & Goldfarb Inc., No. 17cv-6685, 2019 WL 4466714, at *5 (S.D.N.Y. Sept. 18, 2019). Trust
law informs the duty of prudence, because “an ERISA fiduciary’s
duty is derived from the common law of trusts.” Tibble v. Edison
Int’l, 575 U.S. 523, 528 (2015). Because ERISA’s duty of prudence
is interpreted according to the common law of trusts, “a fiduciary
normally has a continuing duty of some kind to monitor investments
and remove imprudent ones.” Id. at 530. The analysis is “context
specific,” giving “due regard to the range of reasonable judgments
a fiduciary may make based on her experience and expertise.”
Hughes v. Nw. Univ., 595 U.S. 170, 177 (2022); see also Singh, 650
F. Supp. 3d at 265-66.
The plaintiffs allege that the recordkeeping fees charged by
the Plan were unreasonably excessive, indicating that the Plan was
managed imprudently. From 2017 to 2020, the Plan charged
recordkeeping fees per-participant in the range of
$230.25 with revenue sharing, and $136.51 to $172.70 without
revenue sharing. SAC ¶¶ 98-99. Comparable plans allegedly charged
between $23 and $30 in recordkeeping fees per participant. The
plaintiffs compare these fee ranges to claim that the Plan fees
were “astronomical” and that the Plan “should have been able to
negotiate a recordkeeping cost in the mid $20 range.” 4 Id. ¶¶ 99,
However, as this Court found in Singh, the plaintiffs must
allege more than that the Plan’s recordkeeping fees were higher
than those of other plans. 650 F. Supp. 3d at 266. Well-reasoned
decisions in this Circuit and elsewhere have found that plaintiffs
must plausibly allege that “the administrative fees were excessive
relative to the services rendered.” Ferguson, 2019 WL 4466714, at
*8; Gonzalez v. Northwell Health, Inc., 632 F. Supp. 3d 148, 167
(E.D.N.Y. 2022) (“A plaintiff must plead administrative fees that
are excessive in relation to the specific services the
recordkeeper provided to the specific plan at issue.”); see also
Smith v. CommonSpirit Health, 37 F.4th 1160, 1169 (6th Cir. 2022)
The plaintiffs rely on the general assertion that “[n]early
all recordkeepers in the marketplace offer the same range of
services and can provide the services at very little cost.” SAC ¶
65. But “[t]he plaintiffs’ allegation that all recordkeepers offer
the same range of services does not mean that all plans employing
The plaintiffs and the defendants advance different methodologies
to calculate the Plan’s recordkeeping fees and arrive at different
per-participant fees. Compare SAC ¶ 98-99, with Defs.’ Mem. of Law
in Supp. of Mot. to Dismiss, at 7-10, ECF No. 37. But the
methodologies the parties adopt have no bearing on the plaintiffs’
failure to plead that these fees were excessive relative to the
a particular recordkeeper receive an identical subset of services
within that range.” Singh, 650 F. Supp. 3d at 267. The plaintiffs
have failed to allege with specificity what recordkeeping services
the Plan received, nor do they plead that the services provided by
the recordkeepers for the comparator plans were the same as those
provided by the Plan’s recordkeepers. SAC ¶ 88. “Because the
plaintiffs’ comparison does not compare apples to apples, the
comparison fails to indicate plausibly imprudence on the part of
the defendants.” Singh, 650 F. Supp. 3d at 267; see also Matney v.
Barrick Gold of N. Am., 80 F.4th 1136, 1156-58 (10th Cir. 2023)
(affirming dismissal of a claim that recordkeeping fees were
excessive when the plaintiffs failed to provide meaningful
comparisons). This claim is therefore dismissed.
The plaintiffs also allege that the Plan was managed
imprudently because the expense ratios charged by the offered
funds were excessive, and the Plan failed to “identify and utilize
available lower-cost share classes of many of the funds in the
Plan.” SAC ¶ 114. The plaintiffs identify five funds, each with an
“identical counterpart” that has a lower expense ratio. Id. ¶ 120.
The plaintiffs allege that the existence of the cheaper share
classes implies that the defendants failed to prudently monitor
the Plan. Id. This argument fails for similar reasons as the
plaintiffs’ recordkeeping argument.
First, “[t]he existence of a cheaper fund does not mean that
a particular fund is too expensive in the market generally or that
it is otherwise an imprudent choice.” Meiners v. Wells Fargo &
Co., 898 F.3d 820, 823-24 (8th Cir. 2018). The plaintiffs allege
that “[t]here is no good-faith explanation for utilizing high-cost
share classes when lower-cost share classes are available for the
same investment” and that “the Plan did not receive any additional
services or benefits based on its use of more expensive share
classes . . . .” SAC ¶ 122. However, with respect to the allegedly
more expensive funds, the Plan’s Form 5500s explain that the Plan
received revenue sharing from four of the five more expensive
class shares and that such proceeds were credited back to
participants investing in those funds. 5 Calandra Decl. Ex. 1, at
42, ECF No. 38-1 (“The Plan and Fidelity entered into an agreement
whereby Fidelity credits the amount of such revenue sharing
payments attributable to the Plan back to the Plan, to then be
allocated to eligible participant accounts as soon as
administratively feasible after each quarter.”). There is no
question that the plaintiffs received a benefit from the higher
cost share classes. The plaintiffs’ contention that the more
expensive share classes “were the same in every respect other than
price to their less expensive counterparts” is unavailing and
The expense ratio difference for the fifth fund is a mere 0.03%.
SAC ¶ 120.
insufficient to plead a plausible breach of the fiduciary duty of
The plaintiffs’ claim concerning the Plan’s failure to
replace low-performing, higher-cost funds with superiorperforming, lower-cost alternatives also fails. “It is wellestablished that allegations of poor results alone do not
constitute allegations sufficient to state a claim for such a
breach.” Laboy v. Bd. of Trs. of Bldg. Serv. 32 BJ SRSP, 513 F.
App’x 78, 80 (2d Cir. 2013). Further, ERISA “does not require
clairvoyance” or support “Monday-morning quarter-backing on the
part of lawyers and plan participants who, with the benefit of
hindsight, have zeroed in on the underperformance of certain
investment options.” Patterson, 2019 WL 4934834, at *17. The
plaintiffs plead that the underperforming funds “should have been
replaced at the beginning of the Class Period or sooner,” SAC ¶
131, but fail to provide any basis beyond underperformance from
which imprudence can allegedly be inferred. Indeed, the Second
Amended Complaint offers only a single snapshot in time as to the
funds’ performance and does not offer any grounds to infer that
the information concerning the alleged underperformance was
available to the fiduciaries at the beginning of the Class Period
or sooner. See Defs.’ Mem. of Law in Supp. of Mot. to Dismiss, at
18-19. Without pleading facts indicating additional indicia of
imprudence, the plaintiffs have not alleged plausibly that the
Plan fiduciaries breached their duty of prudence with respect to
the underperforming funds.
The plaintiffs also bring a claim for a failure to monitor.
This claim is derivative of the plaintiffs’ claims for a breach of
fiduciary duty. Because the plaintiffs have insufficiently pleaded
their claims for a breach of fiduciary duty, the defendants’
motion to dismiss the derivative claim for failure to monitor is
likewise granted. See Coulter v. Morgan Stanley & Co., 753 F.3d
361, 368 (2d Cir. 2014) (finding that failure to monitor claims
“cannot survive absent a viable claim for breach of a duty of
prudence”); Singh, 650 F. Supp. 3d at 269.
The plaintiffs attempt to bolster their allegations with the
declaration of Francis Vitagliano, an “expert with 35 years of
experience in the record keeping and administration business and
the related asset management processing.” SAC ¶ 102. In the
declaration, Mr. Vitagliano opines that based on his experience
and an analysis of the relevant factors, “the Plan should have
been able to obtain per participant recordkeeping fees of $23$26.” Ex. 1, at ¶ 47, ECF No. 30-1 (“Vitagliano Decl.”).
But the plaintiffs’ reliance on an expert declaration at the
motion to dismiss stage is improper. See Singh, No. 21-cv-8458,
2023 WL 4350650, at *5-6 (S.D.N.Y. July 5, 2023) (“The plaintiffs’
reliance on an expert declaration at the motion to dismiss stage
is improper.”). Federal Rule of Civil Procedure 10(c) provides
that “[a] copy of a written instrument that is an exhibit to a
pleading is a part of the pleading for all purposes.” “A written
instrument is a legal document that defines rights, duties,
entitlements, or liabilities, such as a statute, contract, will,
promissory note, or share certificate. A document that does not
evidence legal rights or duties or set forth the legal basis for
the plaintiff’s claims does not satisfy the definition of written
instrument.” Cabrega v. Campbell Soup Co., No. 18-cv-3827, 2019 WL
13215191, at *5 (E.D.N.Y. Nov. 18, 2019).
Here, as in Singh, the declaration was “created long after
the events giving rise to this litigation and is thus not the type
of written instrument falling within the purview of Rule 10(c).”
See Ong v. Chipotle Mexican Grill, Inc., 294 F. Supp. 3d 199, 223
(S.D.N.Y. 2018) (striking a declaration and any conclusory
allegations in the complaint based on that declaration). The
Vitagliano Declaration “was drafted for the purpose of this
litigation,” and accordingly the plaintiffs “could not have relied
on its terms while drafting their complaint.” See id. at 224; see
also Chambers, 282 F.3d at 153 (explaining that a document may be
considered “where the complaint relies heavily upon its terms and
effect” such that the document is “integral to the complaint” and
the plaintiff relied on the document “in framing the complaint”).
Although the declaration is referenced in the amended complaint,
“[m]erely mentioning a document in the complaint will not satisfy
[the integral to the complaint] standard; indeed, even offering
limited quotations from the document is not enough.” Goel v.
Bunge, Ltd., 820 F.3d 554, 559 (2d Cir. 2016). There is no basis
on which the Court may consider Mr. Vitagliano’s opinions as to
whether the Plan charged unreasonable recordkeeping fees. See Ong,
294 F. Supp. 3d at 224 (refusing “to accept as true any paragraphs
in [the] complaint alleging [the] expert’s legal conclusions”). To
do so would “blur the distinction between summary judgment and
dismissal for failure to state a claim upon which relief can be
granted.” DeMarco v. DepoTech Corp., 149 F. Supp. 2d 1212, 1221
(S.D. Cal. 2001); see Singh, 2023 WL 4350650, at *5.
In any event, the Vitagliano Declaration is simply a
conclusory statement of the plaintiff’s argument and it does not
move the allegations from possible to plausible. See id. at *6.
The declaration offers no facts to support its conclusion that
“the Plan should have been able to obtain per participant
recordkeeping fees of $25-$30” other than Mr. Vitagliano’s
“experience” and subjective review. Vitagliano Decl. ¶¶ 42, 47;
see also Cunningham v. Cornell Univ., No. 16-cv-6525, 2019 WL
4735876, at *9 (S.D.N.Y. Sept. 27, 2019) (“[G]eneral references to
an expert’s experience do not provide a reliable basis for his
proposed testimony.”); Huang v. TriNet HR III, Inc., No. 20-cv2293, 2023 WL 3092626, at *8 (M.D. Fla. Apr. 26, 2023) (“Mr.
Vitagliano does not detail how his knowledge and experience led
him to calculate the fees for the relevant time period, or why
those numbers are reasonable in light of any features of the
Mr. Vitagliano attempts to confirm his analysis by
referencing a recent stipulation filed by Fidelity, as he did in
Singh. SAC ¶ 110 (“In a recent lawsuit where Fidelity’s multibillion dollar plan with at least 58,000 participants like the
Plan was sued, the parties stipulated that if Fidelity were a
third party negotiating this fee structure at arms-length, the
value of services would range from $14-$21 per person per year
over the class period . . . .”); see Singh, 2023 WL 4350650, at
*6. And as in Singh, this stipulation cannot be considered because
it does not form part of the pleadings in this case and is not
binding on the parties in this case. 6
The plaintiffs and Mr. Vitagliano assert that the Fidelity
stipulation is significant because it suggests that the Plan could
have obtained comparable recordkeeping services at a lower cost.
See SAC ¶¶ 112-13; Vitagliano Decl. ¶¶ 47-48. But the Fidelity
plan included more than 58,000 participants and $17 billion in
assets under management, rendering any comparison to the Plan -involving 22,000 participants and $3.2 billion in assets under
management -- inapposite.
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?