Lee et al v. Verizon Communications Inc et al
Filing
94
MEMORANDUM OPINION AND ORDER granting 79 MOTION to Dismiss for Failure to State a Claim, MOTION to Dismiss for Lack of Jurisdiction filed by Verizon Employee Benefits Committee, Verizon Corporate Services Group Inc, Verizon Investment Management Corp, Verizon Communications Inc, and Verizon Management Pension Plan. (Ordered by Chief Judge Sidney A Fitzwater on 4/11/2014) (Chief Judge Sidney A Fitzwater)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
WILLIAM LEE, JOANNE
MCPARTLIN, and EDWARD PUNDT,
Individually, and as Representatives of
plan participants and plan beneficiaries
of the VERIZON MANAGEMENT
PENSION PLAN,
§
§
§
§
§
§
§
Plaintiffs,
§
§ Civil Action No. 3:12-CV-4834-D
VS.
§
§
VERIZON COMMUNICATIONS INC., §
et al.,
§
§
Defendants. §
MEMORANDUM OPINION
AND ORDER
In Lee v. Verizon Communications Inc., 954 F.Supp.2d 486 (N.D. Tex. 2013)
(Fitzwater, C.J.) (“Lee II”), the court granted defendants’ motion to dismiss under Fed. R.
Civ. P. 12(b)(1) and (b)(6), dismissed plaintiffs’ ERISA-based1 class action arising from a
pension plan’s decision to purchase a single premium group annuity contract to settle
approximately $7.4 billion of the plan’s pension liabilities, and granted plaintiffs leave to
replead. Plaintiffs amended their complaint, and defendants move anew to dismiss under
Rules 12(b)(1) and (b)(6). Concluding that plaintiffs have failed to cure the pleading
deficiencies identified in Lee II, the court grants defendants’ motion and dismisses this
action.
1
The Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461.
I
The relevant background facts and procedural history are set out in Lee II and need
not be repeated at length. See id. at 488-89. The court will limit its discussion to what is
necessary to understand today’s decision.
This is a certified class action brought by plaintiffs William Lee, Joanne McPartlin,
and Edward Pundt, individually and as representatives of plan participants and plan
beneficiaries of the Verizon Management Pension Plan (the “Plan”). They seek relief against
defendants Verizon Communications Inc. (“VCI”), Verizon Corporate Services Group Inc.,
Verizon Employee Benefits Committee (“VEBC”), Verizon Investment Management Corp.
(“VIMCO”), and Verizon Management Pension Plan (collectively, “Verizon,” unless the
context otherwise requires). In October 2012, VCI entered into a Definitive Purchase
Agreement with the Prudential Insurance Company of America (“Prudential”), VIMCO, and
Fiduciary Counselors Inc. (“FCI”), under which the Plan agreed to purchase a single
premium group annuity contract from Prudential to settle approximately $7.4 billion of the
Plan’s pension liabilities.2 Verizon amended the Plan to direct that it purchase one or more
annuity contracts according to certain criteria. Under the amendment, the annuity contract
2
In deciding Verizon’s Rule 12(b)(6) motion, the court construes the amended
complaint in the light most favorable to plaintiffs, accepts as true all well-pleaded factual
allegations, and draws all reasonable inferences in plaintiffs’ favor. See, e.g., Lovick v.
Ritemoney Ltd., 378 F.3d 433, 437 (5th Cir. 2004). “The court’s review [of a Rule 12(b)(6)
motion] is limited to the complaint, any documents attached to the complaint, and any
documents attached to the motion to dismiss that are central to the claim and referenced by
the complaint.” Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th
Cir. 2010).
-2-
applied to Plan participants who had begun receiving Plan payments before January 1, 2010,
and it required that the annuity provider fully guarantee and pay each pension in the same
form as did the Plan. The annuity transaction was executed in December 2012.
Under the terms of the transaction, Verizon transferred to Prudential Verizon’s
responsibility to provide pension benefits to approximately 41,000 retirees.
These
transferred retirees (the “Transferee Class”) are no longer Plan participants. The participants
and beneficiaries not covered by the transaction (“Non-Transferee Class”)—who number
approximately 50,000—remain part of the Plan.
The Transferee Class alleges three claims: Verizon failed to disclose the possibility
of the annuity transaction in the summary plan description, in violation of ERISA § 102(b),
29 U.S.C. § 1022(b); Verizon breached its fiduciary duties under ERISA § 404(a), 29 U.S.C.
§ 1104(a); and Verizon discriminated against the members of the Transferee Class, in
violation of ERISA § 510, 29 U.S.C. § 1140. The Non-Transferee Class brings a claim via
ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2), for relief under ERISA § 409, 29 U.S.C. § 1109.
It alleges that Verizon breached its fiduciary duties and depleted the Plan’s assets by paying
an excessive and unreasonable amount of expenses to complete the annuity transaction.
In Lee II the court dismissed the claims of the Transferee Class under Rule 12(b)(6)
for failure to state a claim on which relief could be granted. Lee II, 954 F.Supp.2d at 490-95.
The court dismissed the claim of the Non-Transferee Class under Rule 12(b)(1) for lack of
constitutional standing. Id. at 496-99. It also granted plaintiffs leave to replead. Id. at 499500.
-3-
In their second amended complaint for declaratory and injunctive relief under ERISA
(“SAC”), plaintiffs identify the paragraphs of the SAC that they maintain address the
pleading issues addressed in Lee II. See SAC at 4 n.3 (“Plaintiffs point out, as a courtesy and
for the convenience of the Court and counsel for Defendants that the following paragraphs
in this Second Amended Complaint address the pleading issues with respect to the Amended
Complaint that were noted in the Court’s Memorandum Opinion and Order…: 45, 46, 50-52,
59-60, 68-69, 73, 76-77, 79, 91, 108-115, 117, 120-124, 132-133, 137 and Prayer, paragraphs
B.8 and B.9.” (bold font omitted)). Defendants move anew to dismiss, contending that
plaintiffs lack standing to assert claims on behalf of the Non-Transferee Class and that
plaintiffs have failed to state claims on behalf of the Transferee Class on which relief can be
granted. They maintain that the SAC “does not cure any of the pleading defects that were
fatal to the prior complaint. Rather, it merely makes minor tweaks to the prior complaint.”
Ds. Br. 1. Defendants also assert that “[m]any of Plaintiffs’ new allegations, moreover, are
either entirely irrelevant or wholly conclusory, and none provides a basis to alter the Court’s
prior conclusion that Plaintiffs’ claims fail as a matter of law.” Id. Plaintiffs oppose the
motion. The court has heard oral argument.
II
The changes that plaintiffs have made in the SAC to the first and third claims of the
Transferee Class (first and third claims for relief), the claim of the Non-Transferee Class
(fourth claim for relief), and the prayer for relief do not alter the reasoning or result of Lee
II. And the arguments on which plaintiffs rely in opposition to defendants’ motion to dismiss
-4-
these claims are essentially those that the court declined to accept in Lee II. Accordingly, for
the reasons explained in Lee II, and in the absence of material changes between the amended
complaint and the SAC, the court grants defendants’ motion to dismiss the first and third
claims for relief under Rule 12(b)(6) for failure to state a claim on which relief can be
granted, and it grants their motion to dismiss the fourth claim for relief under Rule 12(b)(1)
for lack of constitutional standing.
III
The SAC makes more extensive changes to plaintiffs’ second claim for relief: a claim
by the Transferee Class under ERISA § 502(a)(3) that VEBC and VIMCO are liable for
breach of fiduciary duty, in violation of ERISA § 404(a). But the court concludes that
plaintiffs have still failed to state a claim on which relief can be granted, and that this claim
must be dismissed under Rule 12(b)(6).
A
“In deciding a Rule 12(b)(6) motion to dismiss, the court evaluates the sufficiency of
plaintiffs’ [SAC] by ‘accepting all well-pleaded facts as true, viewing them in the light most
favorable to the plaintiff.’” Bramlett v. Med. Protective Co. of Fort Wayne, Ind., 855
F.Supp.2d 615, 618 (N.D. Tex. 2012) (Fitzwater, C.J.) (quoting In re Katrina Canal
Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal quotation marks and alteration
omitted)). To survive defendants’ motion, plaintiffs must plead “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
-5-
to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility standard is not akin to a
‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has
acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556); see also Twombly, 550 U.S. at
555 (“Factual allegations must be enough to raise a right to relief above the speculative
level[.]”). “[W]here the well-pleaded facts do not permit the court to infer more than the
mere possibility of misconduct, the complaint has alleged—but it has not ‘shown’—‘that the
pleader is entitled to relief.’” Iqbal, 556 U.S. at 679 (quoting Rule 8(a)(2)) (alteration
omitted). “Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Id. at 678.
B
In plaintiffs’ amended complaint, which the court evaluated in Lee II, they alleged that
Verizon breached its fiduciary duties by violating Plan terms, avoiding ERISA rules that
would have applied had the Plan been terminated, and failing to notify Plan participants or
beneficiaries or to ask for their consent before amending the Plan. Plaintiffs asserted that
Verizon was not acting in the best interests of the Transferee Class members because there
was a risk that Prudential would fail, and by removing the class members from the Plan, they
caused them to lose the pension guarantee provided by the Pension Benefit Guaranty
Corporation (“PBGC”). Plaintiffs also alleged that the annuity transaction was not expressly
authorized by any ERISA provision or regulation. Lee II, 954 F.Supp.2d at 491.
In Lee II the court distinguished Verizon’s role as settlor (when it amended the Plan
-6-
to direct the purchase of one or more annuities for participants meeting certain criteria) and
its role as fiduciary (when it managed the Plan, managed or disposed of Plan assets, or
exercised discretionary authority in the administration of the Plan). Id. at 492-93. The court
held that “Verizon was not acting in a fiduciary capacity when it amended the Plan to direct
the purchase of an annuity for participants meeting certain criteria.” Id. at 493.
The court then turned to plaintiffs’ allegations that Verizon violated its fiduciary
obligations to the Transferee Class. Concerning the assertion that it was unreasonable for
Verizon to pay from Plan assets $1 billion more than the value of the transferred pension
liabilities for expenses like commissions and third-party professional fees, the court held that,
despite the size of the payment, it could not reasonably infer from the allegations of the
amended complaint that it was unreasonable to pay Prudential approximately $8.4 billion in
total. Id. at 493-94. Plaintiffs did not specify which aspects of the extra $1 billion of
expenditures were unreasonable, or how they were unreasonable. Id. at 494. The transaction
involved providing billions of dollars in pension benefits to a large group (41,000) of plan
participants and beneficiaries. “Without more than essentially an allegation of the amount
that Verizon paid and the conclusory assertion that it was unreasonable, the Transferee Class
has failed to state a plausible claim that Verizon violated § 8.5’s exclusive benefit rule.” Id.
As for plaintiffs’ claim that Verizon had selected Prudential as “the lone insurer to
issue an annuity” and that Prudential might fail, and the reference in the amended complaint
to a rating agency’s cautionary analysis of the effect of the annuity transaction on Prudential,
“[t]he court [did] not construe these criticisms as allegations that Verizon breached its
-7-
fiduciary duty by choosing only Prudential to fund the annuity, because the Transferee Class
[did] not allege this specifically or assert that Verizon should have selected another entity or
multiple entities to provide the annuity benefits.” Id.
Finally, with respect to plaintiffs’ claim that Verizon harmed the Plan by
consummating the annuity transaction while the Plan was less than 80% funded, the court
concluded that plaintiffs “[did] not explain how the Plan’s funding level affected the amount
the Plan needed to pay Prudential, and therefore ha[d] not stated a plausible claim that
Verizon harmed the Plan or breached a fiduciary duty on this basis.” Id.
C
Although the SAC expands somewhat on certain allegations that the court deemed
insufficient in Lee II, it still fails to plead a plausible claim for breach of fiduciary duty.
Aside from the paragraphs in the SAC that are asserted in support of the second claim
for relief and contain essentially editorial changes,3 the new allegations are found in ¶¶ 91,
108, 109, 110, 111, 112, 113, 114, 115, and 117 of the SAC. Paragraph 91 largely quotes
a provision of ERISA, 29 U.S.C. § 1002(21)(A), that defines when someone is a plan
fiduciary. Paragraph 117 essentially expands plaintiffs’ request for relief.4 This leaves
3
See SAC ¶¶ 93, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, and 107.
4
As amended, ¶ 117 states:
Pursuant to ERISA Section 502(a)(3), 29 U.S.C. § 1132(a)(3),
Plaintiffs ask this Court to grant appropriate class-wide
equitable relief, including a declaration that the Verizon EBC
and VIMCO each failed to meet and breached statutory
-8-
¶¶ 108-15, which allege as follows:
108. In June 2013, a federal regulatory agency, the U.S.
Treasury’s Financial Stability Oversight Council (“FSOC”),
decided to designate Prudential as a “systemically important
financial institution” because Prudential could trigger massive
financial havoc to the whole nation, should Prudential’s
economic fortunes change. Prudential has decided and will
challenge that designation because Prudential does not want any
federal oversight put in place. Prudential’s position to challenge
FSOC’s planned designation of Prudential is consistent with
Prudential’s complicity with VIMCO’s and Plan fiduciaries’
decision that the Transferee Class lose all ERISA federal
protections and the PBGC uniform guarantee under the terms of
the single group annuity provided by Prudential outside the
Plan. Prudential has not and will not act in the best interest of
the Transferee Class, 41,000 persons whom were unknowingly
sent into the sole care of Prudential.
109. When implementing the Plan sponsor’s decision directing
the Plan to purchase one or more annuities from one or more
insurance companies, the Verizon Defendants had a fiduciary
fiduciary duties under ERISA Section 404(a)(1), 29 U.S.C. §
1104(a)(1) and the terms of the Plan, by, among other conduct
as alleged herein, not maintaining the purchased Prudential
annuity as an asset in the ongoing Plan and, thus, preserving the
Transferee Class’s ERISA protections and the uniform
guarantee provided by the PBGC. Pursuant to ERISA Section
502(a)(9), 29 U.S.C. § 1132(a)(9), Plaintiffs ask this Court to
grant appropriate class-wide relief, requiring the purchased
annuity to be maintained under the Plan so as to restore the
Transferee Class’s panoply of ERISA protections and the
uniform PBGC guarantee and better assure receipt by the
Transferee Class of the amounts provided or to be provided by
the Prudential annuity. Plaintiffs request the Court grant
Plaintiffs and Transferee Class members temporary, preliminary
and permanent injunctive and other appropriate equitable relief.
Id. ¶ 117.
-9-
obligation to do what was in the best interests of all Plan
participants. VIMCO and the Plan fiduciaries breached fiduciary
duties by imprudently selecting a single group annuity provider,
thus placing everyone in jeopardy of losing retirement benefits
based upon the fortunes of a single insurer. It would have been
best, more prudent, not to put all of the Plan’s eggs in one basket
but to contract with several or more insurance providers. The
Transferee Class should have been allowed a choice in the
matter.
110. Ironically, on the very same date the Plan was amended by
the Plan sponsor – October 17, 2012 – directing VIMCO to
select one or more insurance annuity providers, VIMCO and the
Plan fiduciaries selected a single insurer, Prudential, for the
massive annuity transaction. Self evidently, VIMCO and Plan
fiduciaries did not prudently allow any period of time, much less
a reasonable time period for consideration of whether to choose
one or more annuity providers. The amendment directing
VIMCO in that regard was a ruse, as it was predetermined that
Prudential would be the only provider. VIMCO’s
implementation of the amendment was, therefore, a breach of
fiduciary duty. Also, VIMCO and Plan fiduciaries breached
their fiduciary duties by not adequately considering the wishes
of any of the Transferee Class members. Indeed, no retiree was
ever consulted about his or her wishes with respect to the
annuity transaction.
111. The Plan amendment instructing VIMCO to purchase one
or more annuities did not mandate that the purchase be made
outside of the Plan. (App. 60-62). The Plan amendment did not
expressly prohibit VIMCO from purchasing one or more
annuities and maintaining that purchase as an asset of the Plan
as part of the ongoing Plan’s portfolio of assets.
112. VIMCO should have exercised its discretion in favor of
the best interests of the Transferee Class when VIMCO was
determining the terms of the purchased annuity, and VIMCO
and Plan fiduciaries should have required the purchased annuity
be maintained as an asset of the Plan, perhaps, designated as an
asset to be used solely to fund the retirement payment
obligations for the Transferee Class.
- 10 -
113. VIMCO and the Plan fiduciaries should have acted
prudently and insured that all retirees maintained ERISA’s
federal protections and the uniform guarantee provided by the
PBGC. That would have been possible if the annuity was
purchased and maintained as an asset in the ongoing Plan so that
all retirees continued to enjoy ERISA’s federal protections and
the PBGC uniform financial guarantee.
114. Prior to the Verizon/Prudential annuity transaction,
Section 8.5 of the Plan required that Plan assets be used for the
“exclusive benefit” of participants to “provide benefits under the
terms of the Plan” and pay “reasonable expenses” of
administering the Plan. (App. 25). However, almost $1 billion
more than necessary to cover the transferred liabilities was paid
to Prudential by the Plan for amounts other than benefits and
reasonable expenses of administering the Plan. The extra $1
billion payment was applied towards expenses, not for
administering the ongoing Plan, but to enable avoidance of
payment of such expenses by the Plan sponsor, Verizon
Communications Inc. and corporate subsidiaries, thus violating
Section 8.5 and the terms of the Master Trust.
115. The extra $1 billion payment was used to pay Verizon’sthe settlor’s obligations for third-party costs related to the
annuity transaction, including fees paid to outside lawyers,
accountants, actuaries, financial consultants and brokers. Those
expenses and fees should have been charged to Verizon’s
corporate operating revenues, not charged to the Plan and
MasterTrust.
SAC ¶¶ 108-15 (bold font omitted).
Interpreted under the Rule 12(b)(6) standard, see supra § III(A), ¶¶ 108-15 allege the
following four grounds for plaintiffs’ breach of fiduciary duty claim: (1) VIMCO and the
Plan fiduciaries breached their fiduciary duties by imprudently selecting a single group
annuity provider, without prudently allowing any period of time, much less a reasonable
period of time, to consider whether to choose one or more annuity providers (¶¶ 108-110);
- 11 -
(2) VIMCO and the Plan fiduciaries did not adequately consider the wishes of any Transferee
Class members, because no class members were consulted concerning the annuity transaction
(¶110); (3) VIMCO and the Plan fiduciaries should have required the annuity to be
maintained as an asset of the Plan, perhaps designated as an asset to be used solely to fund
the retirement payment obligations of the Transferee Class, which would have ensured that
all retirees retained the protections of ERISA and the PBGC (¶¶ 111-113); and (4) Verizon
violated § 8.5 of the Plan, which requires that Plan assets be used for the exclusive benefit
of Plan participants and to provide benefits under the terms of the Plan and pay reasonable
expenses of administering the Plan, because almost $1 billion more than was necessary to
cover transferred liabilities was paid to Prudential for expenses (including for outside
lawyers, accountants, actuaries, financial consultants, and brokers), not for benefits and
reasonable expenses of administering the Plan, in order for VCI and its corporate subsidiaries
to avoid paying these expenses from corporate operating revenues (¶¶ 114-115).
D
Two of the grounds for plaintiffs’ breach of fiduciary duty claim fail because the
disputed decisions involve Verizon’s role as settlor, not Plan fiduciary. As the court
explained in Lee II, “[b]ecause amending a plan is not a fiduciary function, Verizon was not
acting in a fiduciary capacity when it amended the Plan to direct the purchase of an annuity
for participants meeting certain criteria.” Lee II, 954 F.Supp.2d at 493. Plaintiffs’
complaints that the wishes of the Transferee Class were not considered, and that the annuity
was not purchased and retained as part of the Plan, pertain to Verizon’s decisions as settlor,
- 12 -
not as plan fiduciary. See id. These two grounds of plaintiffs’ breach of fiduciary duty claim
therefore fail to state a claim on which relief can be granted.
E
As in their amended complaint, plaintiffs again base their breach of fiduciary duty
claim on the expenditure of almost $1 billion from Plan assets for expenses. In Lee II the
court explained why this ground of their claim failed to state a plausible claim: despite the
size of the payment, the court could not reasonably infer from the amended complaint that
it was unreasonable to pay Prudential approximately $8.4 billion in total, id. at 493-94; the
Transferee Class did not specify which aspects of the extra $1 billion of expenditures were
unreasonable, or how they were unreasonable, id. at 494; the transaction involved providing
billions of dollars in pension benefits to a large group (41,000) of plan participants and
beneficiaries, id.; and “[w]ithout more than essentially an allegation of the amount that
Verizon paid and the conclusory assertion that it was unreasonable, the Transferee Class
ha[d] failed to state a plausible claim that Verizon violated § 8.5’s exclusive benefit rule,”
id.
The SAC does not cure these deficiencies. And in their response brief to defendants’
motion to dismiss, plaintiffs do not even attempt to defend their breach of fiduciary duty
claim on this basis. See Ps. Br. 5-16. The court therefore concludes that this ground of
plaintiffs’ breach of fiduciary duty claim fails to state a claim on which relief can be granted.
- 13 -
F
Plaintiffs’ remaining ground is their claim that defendants breached their fiduciary
duty by selecting a single group annuity provider, without allowing any period of time, much
less a reasonable period of time, to consider whether to choose one or more providers.
Such a claim is legally available.
The relevant inquiry in any case is whether the fiduciary, in
structuring and conducting a thorough and impartial
investigation of annuity providers, carefully considered [the
factors found in Department of Labor Interpretative Bulletin 951] and any others relevant under the particular circumstances it
faced at the time of decision.
Bussian v. RJR Nabisco, Inc., 223 F.3d 286, 300 (5th Cir. 2000). “If so, a fiduciary satisfies
ERISA’s obligations if, based upon what it learns in its investigation, it selects an annuity
provider it ‘reasonably conclude[s] best to promote the interests of [the plan’s] participants
and beneficiaries.’” Id. (quoting Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir. 1982)
(second alteration in original)). “If not, ERISA’s obligations are nonetheless satisfied if the
provider selected would have been chosen had the fiduciary conducted a proper
investigation.” Id. (citing In re Unisys Sav. Plan Litig., 173 F.3d 145, 153-54 (3d Cir.
1999)).
Plaintiffs do little to defend this claim in their response brief, essentially parroting the
SAC and combining it with their contention that the Transferee Class members should have
been consulted:
- 14 -
VIMCO and the Plan fiduciaries breached fiduciary duties by
imprudently selecting a single group annuity provider, thus
placing everyone in jeopardy of losing retirement benefits based
upon the fortunes of a single insurer. It would have been best,
more prudent, not to put all of the Plan’s eggs in one basket but
to contract with several or more insurance providers. The
Transferee Class should have been allowed a choice in the
matter. Different carriers necessarily afford different degrees of
security. A prudent fiduciary would seek the retirees’ consent
and give them a voice and choice in the matter.
Ps. Br. 11.
This ground of the breach of fiduciary duty claim fails for at least two reasons. First,
the allegations of ¶¶ 108-10 that relate to this theory are conclusory, and “[t]hreadbare
recitals of the elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Iqbal, 556 U.S. at 678.
Second, to the extent they are not conclusory, they are implausible when viewed in
tandem with other allegations in the SAC. In ¶ 110, for example, plaintiffs allege:
Ironically, on the very same date the Plan was amended by the
Plan sponsor – October 17, 2012 – directing VIMCO to select
one or more insurance annuity providers, VIMCO and the Plan
fiduciaries selected a single insurer, Prudential, for the massive
annuity transaction. Self evidently, VIMCO and Plan
fiduciaries did not prudently allow any period of time, much less
a reasonable time period for consideration of whether to choose
one or more annuity providers. The amendment directing
VIMCO in that regard was a ruse, as it was predetermined that
Prudential would be the only provider.
SAC ¶ 110. If this allegation were deemed non-conclusory, it would arguably state a
plausible claim that the fiduciaries selected Prudential on October 17, 2012—without
spending any time considering whether to choose one, or more than one, annuity provider,
- 15 -
or even a provider other than Prudential, since it had been predetermined that Prudential
would be the only provider. But the SAC itself refutes these allegations. Paragraph 29
alleges that VCI and VIMCO entered into an engagement agreement with FCI on August 24,
2012, under which FCI was appointed “independent fiduciary.” Id. ¶ 29. Under the
engagement agreement—which allegedly was entered into almost two months before the
fiduciaries selected Prudential—FCI was assigned duties that included representing the
interests of the Plan and the participants and beneficiaries in connection with the selection
of the insurance company or companies to provide an annuity, and the terms of the annuity
contract or contracts, so that such selection and terms complied with the fiduciary standards,
prohibited transaction restrictions, and all other applicable provisions of ERISA. Id. ¶ 29(A).
FCI also undertook the duty to deliver to VIMCO, on or about September 8, 2012, a written
determination stating whether the selection of the annuity provider or providers and the terms
of the annuity contract or contracts complied with the fiduciary standards, prohibited
transaction restrictions, and all other applicable provisions of ERISA. Id. ¶ 29(C). In ¶ 106,
plaintiffs suggest that the decision by VEBC and VIMCO either to allow, or to participate
in, Verizon’s selection of Prudential as the lone insurer was made directly or indirectly in
reliance on FCI.5 And although the SAC makes other complaints about FCI,6 it does not
5
SAC ¶ 106 alleges:
The decision by the Verizon EBC and VIMCO either directly or
indirectly, by reliance upon FCI as an independent fiduciary
proxy, to either allow, or participate in Verizon’s selection of,
Prudential as the lone insurer to issue an annuity subjects
- 16 -
allege that FCI failed to perform its duties concerning the selection of an annuity provider
or providers well before the fiduciaries selected Prudential on October 17, 2012.
Accordingly, the SAC itself alleges in ¶¶ 29 and 106 specific facts that refute the conclusory
allegations in ¶ 110 that VIMCO and the Plan fiduciaries did not prudently allow any period
of time, much less a reasonable time period, for consideration of whether to choose one or
more annuity providers, and that the amendment directing VIMCO in that regard was a ruse,
because it was predetermined that Prudential would be the only provider. Defendants
therefore reasonably argue that “Plaintiffs’ own allegations conclusively disprove their
disingenuous suggestion that VIMCO and/or the Independent Fiduciary [FCI] selected
Prudential as the sole insurer in a single day.” Ds. Br. 15 (bracketed material added). The
court concludes that plaintiffs have failed to state a plausible breach of fiduciary duty claim
on this ground.
G
The court therefore holds that plaintiffs have failed to state a breach of fiduciary duty
claim on which relief can be granted, and their second claim for relief is dismissed.
Plaintiffs Lee, McPartlin and all Transferee Class members to
the risk of a single insurer undergoing some future unexpected
and catastrophic event that could place many retirees and their
beneficiaries in potential financial ruinous circumstances.
Id. ¶ 106.
6
See, e.g., id. ¶ 32 (“When carrying out its appointed duties, FCI never communicated
with any Plaintiff nor any of the Transferee Class members.”).
- 17 -
IV
It is apparent from reading the SAC and plaintiffs’ response brief that—at least with
respect to the Transferee Class—plaintiffs fundamentally disagree with the premise that an
ERISA pension plan can, as here, purchase an annuity to fund plan benefits and remove only
some plan members, thereby eliminating the protections of ERISA and the PBGC for the
removed members. For example, plaintiffs argue:
There is no federal regulation that either contemplates or
countenances the very situation that occurred here. Both the
federal regulation and the interpretative bulletin referred to in
support of Verizon Defendants’ memorandum brief in support
of their motion to dismiss address only the situations where
there is either an annuity purchase at the beginning of a person’s
retirement or an annuity purchase when a standard termination
occurs, affecting all plan participants. Neither the Annuitization
Regulation nor the Interpretative Bulletin provide any approval
for the Verizon Defendants’ actions, which circumvented the
stringent requirements of PBGC oversight attendant to a
standard plan termination, as contemplated by ERISA[.]
Verizon Defendants provide no case law authority construing
the Annuity Regulation to cover any transaction other than a
purchase of insurance annuity by pension plan at the onset of a
participant’s retirement or at the point of plan termination under
ERISA[.]
Ps. Br. 6-7 (citations omitted). But at bottom, plaintiffs are disagreeing with the rights of a
settlor under ERISA, and such a disagreement must be addressed to Congress through
requests for legislative changes to ERISA, not through litigation that complains of the
decisions that ERISA empowers a plan sponsor as settlor to make.
- 18 -
*
*
*
Defendants’ motion to dismiss plaintiffs’ second amended complaint for declaratory
and injunctive relief under ERISA is granted. The claims of the Transferee Class are
dismissed with prejudice under Rule 12(b)(6) for failure to state a claim on which relief can
be granted. The claim of the Non-Transferee Class is dismissed without prejudice under
Rule 12(b)(1) for lack of constitutional standing.
SO ORDERED.
April 11, 2014.
_________________________________
SIDNEY A. FITZWATER
CHIEF JUDGE
- 19 -
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?