Ortiz et al v. American Airlines Inc et al

Filing 231

ORDER granting 178 Motion for Summary Judgment. ; granting 180 Motion for Summary Judgment. plaintiffs take nothing on their claims against defendants; and that plaintiffs' claims be, and are hereby, dismissed with prejudice. (Ordered by Senior Judge John McBryde on 8/5/2020) (wrb)

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

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~~~-~

IN THE UNITED STATES DISTRICT CO
NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION

CO~CCC~'"cOC'"O~~~

U.S. DIBTIOCT COU!n'
RIIDRTHElmlllSTI\TCTOFTEXAS

CLERK, U.S. DISTRICT COURT

SALVADORA ORTIZ AND THOMAS
SCOTT, ON BEHALF OF THEMSELVES
AND ALL OTHERS SIMILARLY
SITUATED,
Plaintiffs,

vs.
AMERICAN AIRLINES, INC.,
ET AL.,
Defendants.

By~~"·--~~.~~--

§
§
§
§
§
§
§
§
§
§
§
§
§

----~..!2~l':!'X-'"-----'

NO.

4:16~CV-151-A

MEMORANDUM OPINION AND ORDER
RE SUMMARY JUDGMENT MOTIONS
Before the court for decision are motions for summary
judgment filed by defendants American Airlines, Inc.
("American") , and The American Airlines Pension Asset
Administration Committee ("Committee") , and by American Airlines
Federal Credit Union ("Credit Union").
I.

History of the Litigation
This action has been pending for four and one-half years.
Therefore, the reader of this opinion probably will benefit from
a discussion of the most-significant developments in the action
during that time period, which the court is providing under this
heading.

1

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The court has had, and defendants have expressed,
uncertainty concerning the exact nature of the claims that are
being asserted by plaintiffs, which were not resolved until
plaintiffs clearly defined their claims in a document they filed
November 12, 2019.

Infra at 16-17. 1

And, the court and the

parties have had uncertainty as to whether this action should
proceed as a class action or simply as a representative action
as defined in In re AEP ERISA Litigation, No. C2-03-67, 2009 WL
3854943

(S.D. Ohio Nov. 17, 2009)

The court made known its

decision on that subject by informing the parties in an order
issued June 15, 2020, that the court had concluded that the
action should proceed as having been brought by plaintiffs in
representative capacities, as contemplated by In re AEP ERISA
Litigation.

See Doc. 167 at 2 n.1.

2

Those uncertainties had

roles in the less than rapid progression of this case over the
years
A.

Plaintiffs' Complaint
This action was initiated on February 10, 2016, by

Salvadora Ortiz ("Ortiz") and Thomas Scott ("Scott")

1

A question has existed as to whether plaintiffs' pleading supports the claims they now define.
However, the comt has concluded that, given a study of the kind contemplated by Bell Atl. Corp. v.
Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), there are allegations of facts
in the pleading that suppmt plaintiffs' now-defined claims.
2The "Doc._" references are to the numbers assigned to the referenced items on the docket in
this Case No. 4: 16-CV-151-A.

2

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("plaintiffs"), on behalf of themselves and others similarly
situated, by the filing of a "Class Action Complaint

(ERISA)"

naming as defendants American, Committee, and Credit Union.
A summary description of plaintiffs pleading follows:
Plaintiffs alleged that ih filing the action, they were
acting as representatives of a 401(k)

3

retirement plan for

employees of participating AMR Corporation subsidiaries (the
"Plan") as authorized by

§§

502 (a) (2)

and (3) of the Employee

Retirement Income Security Act of 1974, as amended,
[29 U.S.C.

§§

1132 (a) (2) and (3)].

Doc. 1 at 1-2,

("ERISA")

n

1

& 2.

Each defendant was alleged to be a fiduciary as to the Plan and
its participants, and each allegedly violated fiduciary duties
owed to the Plan and its participants.

Each named plaintiff was

a participant in the Plan, as defined in ERISA
§

1002(7)],

§

3 (7)

[29 U.S.C.

and has owned, directly or indirectly, an interest

in the Plan's investment option that is referred to in the
complaint as the American Airlines Credit Union.Demand Deposit
Fund ("AA Credit Union Fund") .
In addition to asserting actions on behalf of the Plan,
plaintiffs alleged class action facts on behalf of all
participants and beneficiaries of the Plan who invested directly
or indirectly in the AA Credit Union Fund at any time from

3

The "40l(k) designation derives from the compliance by the Plan with the defened compensation requirements of
26 u.s.c. § 40l(k).

3

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February 12, 2010, through the date of the judgment in this
action (excluding certain categories of persons).

Id. at. 9-11.

The Plan is an employee pension benefit plan within the
meaning of ERISA

§

3 (2) (A)

u.s.c.

[29

1002 (2) (A)].

§

It is an

eligible individual account plan, which provides an individual
retirement account for each participant, as contemplated by
ERISA§ 3 (34)

[29 U.S.C.

§

1002 (34)], the benefits of which are

based solely on the amount contributed to the participant's
account, with adjustments for income, gains, losses, and
expenses.

Such a plan is commonly referred to as a "defined

contribution plan."

The participants select the investments to

be made in their accounts from investment options provided for
the participants by one or more Plan fiduciaries.
intended to comply with ERISA

§

404 (c)

[29 U.S.C.

The Plan is
§

1104 (c)] and

related regulations.
By ERISA regulation, one of the investment options that
must be provided to the participants of such a plan is an
income-producing, low-risk, liquid fund.

The only option

provided by defendants to the Plan participants for an
investment in that category was the AA Credit Union Fund, which
is a fund sponsored and managed by Credit Union.
Defendants violated their fiduciary duties by having the AA
Credit Union Fund as the only Plan investment option that would
qualify as an income-producing, low-risk, liquid fund.
4

The AA

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Credit Union Fund produced extremely poor investment returns.
The return on the AA Credit Union Fund was at all material times
less than a poorly managed checking account. At the same time
that the AA Credit Union Fund was providing the Plan
participants who invested in it the meager returns described
above, checking accounts offered by Credit Union to its
depositors paid better returns than those earned by the Plan
participants who elected to invest in the AA Credit Union Fund.
One such account paid interest at the rate of 2.27%.

Stable

value funds, commonly used by large plans similar to the Plan,
typically offered a greater return on a participant's investment
than does the AA Credit Union Fund.
Had defendants properly performed their fiduciary
obligations to the Plan and its participants, the incomeproducing, low·risk, liquid fund option would have been, or
included, an option known as a stable value fund.
If the Plan funds invested in the AA Credit Union Fund had
instead been invested in a stable value fund returning average
benchmark returns during the proposed class period, plaintiffs
and the other Plan participants would not have lost tens of
millions of dollars in their retirement savings, and would not
continue to suffer additional losses as a result of the
existence of the AA Credit Union Fund option in the Plan.

5

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American Airlines and Committee are liable under 29 U.S.C.
§

1109(a) to make good to the Plan any losses to the Plan

resulting from their breach of fiduciary duties related to the
failure to provide a stable value fund as an investment option.
At all relevant times, Credit Union held $1 billion in Plan
assets in the AA Credit Union Fund, which is a demand deposit
account,

for which it had a fiduciary obligation to pay a

reasonable rate of interest.

Rather than to pay a reasonable

rate of interest to the Plan participants who elected to invest
in the AA Credit Union Fund, Credit Union used the $1 billion in
Plan assets it held as investments by Plan participants to
provide loans to members of Credit Union and to make other
investments for which it earned substantial income, which, in
turn, permitted Credit Union to offer substantially higher
interest rates on similar demand deposit accounts to customers
other than the Plan participants who invested in the AA Credit
Union Fund.

Credit Union should have paid to plaintiffs in the

proposed class at least the same rate of interest it was
offering to its other customers.
Consequently, Credit Union is liable under 28 U.S.C.
§

1109(a) to make good to the Plan any losses to the Plan

resulting from Credit Union's breach of fiduciary duty in failing
to pay to the Plan participants a reasonable rate of return on
investments they made in the AA Credit Union Fund option.
6

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American and Committee share with Credit Union, as cofiduciaries,

liability under 29 U.S.C.

§

1105(a) for those

losses by reason of having participated in Credit Union's breach
of fiduciary duty, knowing that Credit Union's conduct was such a
breach, by failing to take reasonable efforts under the
circumstances to remedy the breach and by reason of ERISA
§

406 (a)

[29 U.S.C.

§

1106 (a)], which prohibits transactions

between the Plan and a party-in-interest.
Plaintiffs alleged three causes of action.

First, in Count

I, they alleged that American and Committee violated their
fiduciary duties of loyalty and prudence by failing to remove
the AA Credit Union Fund option from the Plan, as the Plan's
"income producing, low risk, liquid fund."

Doc. 1 at 11-12.

Second, in Count II, they asserted that the Credit Union
breached its duty of loyalty by dealing with Plan assets for its
own account.

Id. at 13-14.

And, third, in Count III,

plaintiffs asserted that American and Committee engaged in a
transaction prohibited by ERISA by allowing Plan assets to be
invested in AA Credit Union Fund's demand deposit account.

Id.

at 14-15.
B.

The Motions to Dismiss
In May 2016, American and Committee filed

dismiss, asserting as its grounds that

a

motion to

(a) the inclusion of the

Credit Union option in the Plan did not signal imprudence or
7

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

disloyalty,

Page 8 of 40 PageID 9723

(b) plaintiffs failed to allege facts stating a

claim for co-fiduciary liability, and (c) the co-fiduciary
liability claim must be dismissed because the Credit Union's
above-average dividends show that its returns were reasonable.
Doc. 26 at 7, 12, 13.
Credit Union filed a motion to dismiss in May 2016 for
failure to state a claim on the grounds that the claims against
Credit Union failed to allege sufficient facts to support
plaintiffs' contention that Credit Union violated 28 U.S.C.
§

1106(b) (1), because the alleged prohibited transactions fell

within ERISA'S exemptions, and the other counts pleaded by
plaintiffs did not allege facts supporting a cause of action
against the Credit Union.
C.

Doc. 20 at 5, 7, 9.

The Proposed Settlement
After having obtained extensions of time for the filing of

responses to the motions to dismiss, rather than to file such a
response, plaintiffs filed July 18, 2016, a document titled
"Unopposed Motion for Order Preliminarily Approving (I)
Conditional Certification of the Settlement Classes;
Appointment of Lead and Class Counsel;

(II)

(III) Preliminary

Approval of Settlement; and (IV) Approval of Form and Manner of
Notice."

Doc. 51.

The proposed settlement contemplated that a

settlement class would be approved, and that, after notice to
the proposed class members, the claims of plaintiffs and the
8

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class would be settled by a payment by defendants, in two
segments, of a total of $8,800,000, one-third of which was to be
received by the attorneys representing the plaintiffs.

Doc. 54

at 19 n.6.'
In their efforts to persuade the court to approve the
settlement, plaintiffs and their counsel so convinced the court
of the merit of plaintiffs' claims on behalf of the class that
the court concluded, among its concerns relative to the terms of
the proposed settlement, that the amount to be received by the
settlement class was not sufficient.

The court's concerns are

set forth in the memorandum opinion and order the court issued
on November 18, 2016.

Doc. 54 at 14-33.

However, the court withheld a final ruling relative to the
settlement so that the parties might have an opportunity to
provide to the court additional information that would cause the
court to conclude that the settlement was appropriate.

Id. at

30-34.
D.

Efforts to Obtain Further Information Relative to the
Settlement Negotiations; and, the Court's Decision to
Decline to Approve the Settlement
After the court issued its November 18, 2016 memorandum

opinion and order, there was significant activity related to the

4

The information the court found persuasive in denying the request for approval of the settlement
are set forth, in part, at pages 14-17 of the court's November 18, 2016 memorandum opinion and order.
Doc. 54. The court explained in its October 6, 2017 order the sequence of events that led to the denial of
the motion for approval o.fthe settlement. Doe. 80.
9

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court's attempts to obtain additional information related to the
settlement proposal.

See Docs. 55-83.

On October 6, 2017,

after having considered all of the material it had received
pertaining to the proposed settlement,' the court issued an order
denying all relief sought by the July 2016 Unopposed Motion for
Order Preliminarily Approving (I) Conditional Certification of
the Settlement Classes;
Counsel;

(II) Appointment of Lead and Class

(III) Preliminary Approval of Settlement; and (IV)

Approval of Form and IVJanner of Notice.

Doc. so.

The efforts of

the court to obtain meaningful information relative to the
proposed settlement are outlined in the October 6, 2017 order.
Id.

The court stated that "[f]or the reasons given on pages 23-

5

On page 32 of the November 18, 2016 order, the coutt described in some detail the information
it required before it would be in a position to make a ruling on the proposed settlement. Doc. 54 at 32.
The court encountered difficulty in obtaining the requested information, and questions that it ever
obtained everything plaintiffs represented to the comt in their filings they relied on in making the
allegations they made in their complaint and in making their decision to enter into a settlement. For
example, on April4, 2017, the court noted in one of the orders it issued relative to its desire to receive and
review additional information, the following:
The comt notes that plaintiffs have provided the coutt very little of the
information in which the comt expressed an interest on page 32 of the November 18,
2016 order In receiving to assist the comt in making a decision as to the relief sought by
plaintiffs by their July 18, 2016 motion. Presumably all or some part of that material will
be included in the documents and other items plaintiffs propose to present to the court for
in camera review, If that will not be the case, the court expects plaintiffs to include in the
document plaintiffs are to file by April 13,2017, an explanation of why the plaintiffs are
not making a full disclosure as suggested at pages 32-33 of the November 18,2016 order.
Conspicuously absent from the material plaintiffs have furnished to the comt is
anything related to the discovery and interview activities mentioned on page 17 of the
comt's November 1.8, 2016 order. The court questions why those items could be of a
privileged nature. The court directs plaintiffs to comment on those subjects in the
document they are to file by April 13, 20 I 7, pursuant to this order.
Doc. 76 at 2-3. Unfortunately, the coutt was never satisfied that it received a full disclosure. See
Doc. 77, Ex. B.

10

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27 of the November 18, 2016 memorandum opinion and order, the
court is unable to conclude that there is good cause for the
entry of an order, or the scheduling of a hearing, as sought by
plaintiffs' July 18, 2016 motion."
E.

Id. at 6.

Plaintiffs' Consolidated Opposition to Defendants• Motions
to Dismiss
On November 6, 2017, plaintiffs filed their consolidated

opposition to the motions to dismiss.

Doc. 81.

Summed up,

plaintiffs vigorously maintained that they had alleged facts
that plausibly stated causes of action against each of the
defendants.

Plaintiffs summarized their position in opposition

to the motions by the following statements in their consolidated
opposition:
In reality, the gravamen of Plaintiffs• Complaint is
that the Credit Union Fund performed so poorly during
the relevant time period that allocating more than $1
billion in Plan assets thereto was a breach of their
fiduciary duty of prudence. Although a stable value
fund is certainly one alternative to the deeply-flawed
option the American Airlines Defendants did choose, it
is not the only such alternative.
Id. at 1-2.

* * * * *
Plaintiffs allege that Defendants, by virtue of
their bizarre choice to eschew better performing
retirement investment options in favor of the AA
Credit Union Fund and the exceedingly poor performance
thereof, violated their duties of prudence and loyalty
to the Plan and its participants like Plaintiffs.
Compl. at ~~ 37, 44 et seq. Further, Defendants'
misconduct constitutes a prohibited transaction under
ERISA. Compl. at ~~ 52 et seq.
11

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Id. at 4.

* * * * *
F.

Denial of the Motions to Dismiss
By order issued November 27, 2017, the court denied both of

the motions to dismiss, noting that "[t]he court is satisfied
that plaintiffs have met their pleading burden" and tha.t " [t] he
arguments defendants make go to the merits of the claims and
would more properly be presented by motions for summary
judgment."
G.

Doc. 84 at 2.

Order Directing the Filing of an Appropriate Motion for
Class Certification, and the Filing of the Motion
As of March 23, 2018, plaintiffs had not filed a motion for

class certification other than the inclusion of a request for
conditional certification in the motion they filed related to
the proposed settlement in July 2016.

In an order signed

March 23, 2018, the court gave plaintiffs a deadline of
April 23, 2018, for the filing of an appropriate motion for
class certification, along with a supporting brief.

Doc. 87.

On the deadline fixed by the court, plaintiffs filed such a
motion and supporting memorandum and appendix.
90.

Docs. 88, 89,

The motion was opposed, and the motion and opposition led

to a number of filings by the parties.

See Docs. 94-99, 101-04,

108, 109, 112, 114, 116-17, 120, 122-23, 127-29.

12

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H.

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The Declarations of Three Plaintiffs' Experts That
Accompanied Their Motion for Class Certification
Plaintiffs provided the court with their motion for class

certification declarations of three persons that plaintiffs
represented are experts who would be used by plaintiffs at the
trial of this action to establish plaintiffs' theories of
liability and damages.

They were Jack DeWitt

Levy ("Levy") , and James King, Jr.

("DeWitt"), Roger

("King") .

DeWitt represented that he had been retained by plaintiffs
to provide expert opinions concerning the methodology for the
determination and calculation of damages related to the claims
asserted by plaintiffs and the putative class members.
at APPX 31.

Doc. 90

So far as the court can determine, DeWitt did not

put any information in his declaration that would benefit the
court in any decision that would be required for resolution of
this action.
Levy represented that he was retained by the plaintiffs to
provide an expert opinion in connection with plaintiffs' motion
for class certification.

He included in his declaration the

opinions he had formed, none of which appear to further the
interests of plaintiffs in this action.

Id. at APPX 79.

King said in his declaration that he was retained by the
plaintiffs to provide an expert opinion in connection with
plaintiffs' motion for class certification.

13

Id. at APPX 93.

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The summary and conclusions in his declaration suggest that his
contribution at trial would be to establish the superiority of
the financial return of a stable value fund over the return of
the AA Credit Union Fund option, but he provided no dollar and
cents information in his declaration.
The court did not find helpful in any of its decisionmaking any of the documents filed by plaintiffs in support of
their motion for class certification.
I.

The Telephone Hearing Relative to the Status of Plaintiffs'
Case
Because of the shortcomings of the class certification

documents plaintiffs filed April 23, 2018, and the uncertainties
that arose from that filing and subsequent filings by the
parties, concerning the exact nature of plaintiffs' claims and
whether this action should proceed as a class action or as a
representative action under the authority of 29 U.S.C.
§

1132(a) (2) and (3), the court arranged for a telephone hearing

on September 18, 2018, during which counsel for plaintiffs and
defendants were on the line.

Doc. 133.

For the reasons

expressed during that telephone hearing (id. at 21-25), and
because none of plaintiffs' proposed experts provided meaningful
or definitive opinions in their respective declarations

(Doc. 90

at APPX 31-110), the court made lcnown that it did not find any
of those declarations helpful as to any of the legal or factual

14

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issues that required resolution in this action.

The court

discussed other inadequacies in plaintiffs' class certification
filings,

and gave the parties an opportunity to file

supplemental briefing on certain issues.
J.

The September 30, 2019 Order and Responses Thereto
In a further effort to resolve uncertainties concerning

positions that are being taken by the plaintiffs in this action,
the court issued an order on September 30, 2019 (Doc. 153),
posing the seven questions set forth below to be answered by the
parties, either jointly, or, if a joint answer could not be
agreed upon, separately:
Question No. 1:

Should This Action Should Proceed as a
Class Action?

Question No. 2:

Is Notification to Other Participants and
Beneficiaries of the Plan Required or
Desirable?

Question No. 3:

What Is an Appropriate Ending Date for the
Period of Time for Calculation of Damages?

Question No. 4:

Does Each of the Plaintiffs Have Standing
to Bring This Action as a Representative
of the Plan?

Question No. 5:

What Relief Are Plaintiffs Now Seeking?

Question No. 6:

Have Plaintiffs Made the Disclosures
Required by the Federal Rules of Civil
Procedure as to Each of the Forms of
Relief Plaintiffs Are Seeking on Behalf of
the Plan?

Question No. 7:

What Technique or Procedure Do Plaintiffs
Have in Mind in Determining Allocation
among Participants and Beneficiaries of
15

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the Plan of Whatever Recovery Might Be
Made for the Plan in This Action?
Doc. 153 at 1, 6, 7, 8, and 10.

The responses the parties made

to that order are described in some detail in an order the court
issued June 15, 2020.

K.

Doc. 168.

Orders Requiring Identities and Reports of Experts to Be
Used at Trial, and Responses Thereto
On June 15, 2020, the court, after having called the

attention of the parties to the recent decision of the Supreme
Court in Thole v. U.S. Bank N.A.,

u.s.

, 140 S. Ct. 1615

(2020), Doc. 168 at 14-18, ordered that by July 6, 2020,
plaintiffs provide the. court identities of, and reports from,
the experts they propose to use to establish damages suffered by
each of the named plaintiffs and supporting their theories of
damages suffered by the Plan.

Those theories, as described by

plaintiffs in an item filed November 12, 2019, as plaintiffs'
answer to Question No. 7, supra at 15, were as follows:
Plaintiffs' Complaint presents two independent
claims of separate breaches of fiduciary duty against
two different defendants, each with a separate theory
for the calculation of damages.

Fi.rst, Plaintiffs claim that American Airlines
breached its fiduciary duty by imprudently and
disloyally selecting and retaining a capital
preservation option (the AAFCU option) that had
dramatically lower investment returns than other
readily available capital preservation investments,
including stable value funds. The measure of damages
against the American Airlines Defendants is the
difference between the interest rate that would have
16

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been provided by the prudent choice and the much lower
interest earned on the alleged imprudent choice.
Second, Plaintiffs claim that the AAFCU, as a
Plan fiduciary holding plan assets and res.ponsible for
the investment of Plan assets, breached its fiduciary
duties by using those Plan assets for its own benefit
and failing to pay a reasonable rate of interest to
the Plan, as required by ERISA§ 408(b) (4). The
measure of damages against the AAFCU for that
misconduct is the difference between (i) a reasonable
rate of interest, taking into account the investment
income earned by the AAFCU using the Plan's deposits,
as well as the amount of interest paid to other
depositors (during the Class Period, the AAFCU paid
other depositors more than 2% interest on deposits up
to $2,500), and (ii) the lower rate of interest that
was actually paid to Plan participants.

If both American Airlines and the AAFCU are found
liable, then the damages attributable to the breach of
fiduciary duty by American Airlines would be offset by
the amount of damages to be paid by the AAFCU since in
either case the maximum damages owed to the Class
would be measured by the difference between the
interest that would have been paid by a prudently
selected capital preservation option and the interest
actually paid by the AAFCU. The breach by the AAFCU
was secondary to the American Airlines breach and
served to increase the loss suffered by the Plan (and,
by extension, its participants) . Had the AAFCU paid a
reasonable rate of interest, the damages owed by
American Airlines would have been less.
Doc. 154 at 3-4.
By a second order issued on June 15, 2020, the court
directed defendants to file by July 13, 2020, a document
identifying each expert a defendant proposed to use as an expert
witness at the trial of this action and file a report of each
such expert.

Doc. 167.

17

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L.

Page 18 of 40 PageID 9733

The Experts Identified by Documents the Parties Filed in
Response to the June 15, 2020 Orders
1.

Plaintiffs' Experts

Plaintiffs filed documents on July 6 and 10, 2020, in
response to the June 15, 2020 order requiring them to make
disclosure of expert witness information.
203.

Docs. 192, 193, 202 &

They disclosed identities, and provided reports, of two

experts who would testify on their behalf.
The first, King, said in his report that he is of the
opinion that American and Committee were at fault in not causing
the investment options for participants in the Plan to include a
stable value fund; that such a fund would be an investment
option superior to the AA Credit Union Fund option; that the
Plan suffered damages in the form of the difference in income
that its participants would have earned by investment in a
stable value fund option, if properly offered, and what they
actually earned from investment in the AA Credit Union Fund
option; and, that the named plaintiffs, Ortiz and Scott,
suffered losses of $3,000 and $8,400, respectively, in income
they would have earned had their AA Credit Union Fund
investments been, instead, in a stable value fund.
APPX3-APPX4.

Doc. 193 at

Additionally, he proposes to testify that

Committee and its successor committees should not have used the
AA Credit Union Fund as the Plan's principal preservation

18

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option, but should have used a stable value fund instead.

Id.

In his report, he expressed other opinions, all related to the
subject matters of the main opinions mentioned above.

Id. at

APPX4-APPX15.
The other proposed expert of plaintiffs was identified as
Neil Librock ("Librock").

Docs. 202 & 203.

His opinions were,

for the most part, on the same subjects to which expert witness
King devoted his attention.

A summary of Librock's most

significant opinions, as set forth in his report,

is as follows:

18.
The historic rate of return on the AA Credit
Union Option has been very low, averaging only 50
basis points (one-half of one percent) over the nineyear analysis period, and at times as low as 0.1% .
This very low rate of return means that employee
retirement contributions into the Credit Union Option
generate very low future value for the employees. In
fact, over the past 10 years, the Credit Union
Option's rate of return has been significantly less
than the U.S. inflation rate, meaning employees are
actually worse off for having invested their
retirement savings in the Credit Union Option rather
than simply holding cash in their homes.
19.
For each year from 2013 - 2018 the Fund rate
of return was significantly lower than other AAFCU
member deposit accounts, even though prior to 2013 the
Credit Union Option earned the same interest rate as
typical shares of the Credit Union and Individual
Retirement Accounts (also known as "IRAs") invested
with the Credit Union. The Credit Union Option, which
is tied to a large long-term retirement account, is a
more stable source of deposits and, in a competitive
banking market, should offer rates of return
equivalent to certificates of deposit. In my opinion,
the rates of return for the Credit Union Option from
2010-2.018 were not competitive.

19

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Page 20 of 40 PageID 9735

20.
Plaintiffs Ortiz and Scott suffered lost
financial opportunity due to their investments in the
Credit Union Option. Stated differently, Ortiz and
Scott could have had more retirement savings if their
investments had been placed in a product with a more
competitive interest rate. Ms. Ortiz suffered lost
economic opportunity of approximately $1,116 (without
compounding) from January 1, 2010 through August 5,
2016. Mr. Scott suffered lost economic opportunity of
approximately $1,843 from January 1, 2010 through
October 21, 2011.
21. Similarly, the Participants (and the Plan as
a whole) suffered lost economic opportunity of
approximately $61,281,000 from January 1, 2010 through
December 31, 2018 (without compounding) from
investments in the Credit Union Option.
Doc. 203 at APPX9-APPX10.
In plaintiffs• July 6, 2020 filing, titled "Plaintiffs'
Disclosure of Expert Witnesses," they again defined the nature
of their claims against American, Committee, and Credit Union
(Doc. 192 at 1-2), which were basically the same as the
descriptions they used in their November 12, 2019 filing in
defining their claims (supra at 16-17).
2.

Experts Designated by American and Committee

By notice filed July 13, 2020, American and Committee named
Francis A. Longstaff

("Longstaff") and Walter N. Torous

("Torous") as their experts, and provided copies of their expert
reports.

Doc. 205.

Longstaff described in his report the

subjects upon which he proposed to provide expert evidence as
follows:

20

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Page 21 of 40 PageID 9736

a.

Evaluate whether a common method can be used to
determine whether participants were harmed by a
failure to include a stable value fund as a Plan
investment option "either in place of or in
addition to the American Airlines Credit Union
Demand Deposit Option" (the "Credit Union Option")
on a class-wide basis, or whether individual
inquiry would be necessary;

b.

Evaluate whether participants have a common
interest in a determination by the Court as to
whether the Credit Union Option is a prudent and
permissible Plan option.

Doc. 205 at ECF 15 (footnote omitted)

6

Torous described in his

report his assignment as an expert witness as follows:
5.

Counsel has asked me to:
a.

b.

Assess whether, from an economic
perspective, it was reasonable to include
the American Airlines Credit Union Demand
Deposit Option ("Credit Union Option") in
the Plan lineup; and

c.

6

Discuss different capital preservation
investment vehicles and the relevant
differences in the risks and liquidity
thereof;

Review and, where appropriate, respond to
the opinions and analyses presented by
Plaintiffs' expert James J. King, Jr.
Specifically, I was asked to respond to
Mr. King's opinion that "stable value
funds are a superior investment option
than both demand deposit accounts (such
as the [Credit Union Option]) and money
market funds for use as a principal
preservation option in defined
contribution plans." I was also asked to
respond to Mr. King's assertion that the
Plan's failure to offer a stable value

The ECF page number 1'eferences are to the ECF header numbers at the tops of the pages.

21

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

Page 22 of 40 PageID 9737

fund resulted in losses in excess of $180
million over the 2010 to 2017 period
("Review Period") .
Doc. 205 at ECF 120 (footnotes omitted).
3.

Expert Designated by Credit Union

By a document filed July 13, 2020, Credit Union designated
Jeffrey P. Gaia ("Gaia") as its proposed trial expert, and
provided a copy of Gaia's report.

Doc. 206.

Gaia explained his

role as an expert witness in this case as follows:
AAFCU, through its counsel, retained me as an expert
witness to provide professional opinions, based on my
experience, on Plaintiffs' claims against Defendant
AAFCU. Importantly, the scope of my opinions is
directed to address only those claims against
Defendant AAFCU. Specifically, that:

•

AAFCU was unjustly enriched by setting "below
market" interest rates on the "Credit Union
Option" product offered to participants in The
Plan .

•

AAFCU knowingly underpriced the Credit Union
Option at levels below what Plaintiffs claim
was
a
comparable
product
offering,
the
"Priority Checking" account.

•

Therefore,
participants
in
the
Plan
who
invested Plan balances in the Credit Union
Option were damaged in an amount equal to the
rate differential existing between the actual
paid rate on balances invested in the Credit
Union Option versus the rate offered in the
Priority Checking account product,
or the
"effective rate" as described by Mr. Librock.

In addition, Mr. Librock has raised a new damage claim
theory in his report that is not identified in the
Complaint. I will address, therefore, .Mr. Librock•s

22

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Page 23 of 40 PageID 9738

use of an •effective interest rate• in the calculation
of damages.
Doc. 206 at ECF 7-ECF 8 (footnotes omitted).
M.

Issuance of a Scheduling Order, Motions of Plaintiffs' In
Response Thereto, and Rulings Thereon
On June 24, 2020, the court issued an order setting

schedule and providing special pretrial instructions, which,
inter alia, fixed a discovery deadline of July 17, 2020, a
pretrial conference date of August 7, 2020, and a trial date of
September 14, 2020. 7
N.

Doc. 169.

Denial of Class Certification
On July 1, 2020, the court issued an order denying

plaintiffs' motion for class certification, and expressed the
conclusion that the court is satisfied that plaintiffs filed
this action on behalf of the retirement plan in question
pursuant to the authority of 29 U.S.C.

§

1132(a) (2) & (3) and

that there is no need for plaintiffs to proceed as
representatives of a class.

Doc. 176.

7
No jury having been requested, the coutt setting was a non-jury trial. Motions for continuance
of deadlines or activity dates contained in orders of the coutt were filed, and, for the most patt, were
denied.

23

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

0.

Page 24 of 40 PageID 9739

The Motions for Summary Judgment
1.

The Joint Motion Filed by American and Committee

In their joint motion for summary judgment, American and
Committee based their request for summary judgment on the
following grounds:
I.

UNDISPUTED FACTS FORECLOSE PLAINTIFFS' CLAIM
THAT DEFENDANTS IMPROPERLY SELECTED OR
RETAINED THE CREDIT UNION OPTION (COUNT I)
A. Plaintiffs Lack Article III Standing to
Bring Their Imprudence Claim Because They
Have Failed to Establish That They Suffered
An Injury In Fact.
B. Plaintiffs' Challenge To The Initial Selection
Of The Credit Union Option Is Time-Barred.
c. Undisputed Facts Preclude Plaintiffs From
Establishing That the Credit Union Option Was
An Unreasonable Retirement Investment Vehicle,
And Thus That the Fiduciaries Improperly
Retained It.
1. Plaintiffs have failed to provide a
meaningful benchmark to support their
imprudence claim.

(a) Greater Risk
(b) Less Liquidity
2. Plaintiffs' Criticism of Options Like the
Credit Union Option Is Out-Of-Step With
Fiduciary Practice, And Recent Cases Have
Rejected Similar Categorical Challenges to
Capital Preservation Options With Lower
Returns.
3. Plaintiffs' Argument Ignores the Role of the
Credit Union Option Within the Plan's
Broader Investment JV/enu.

24

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

II.

Page 25 of 40 PageID 9740

UNDISPUTED FACTS SHOW THAT PLAINTIFFS' CLAIM FOR COFIDUCIARY LIABILITY AGAINST AMERICAN AIRLINES FAILS
(COUNTS I AND II) .

III. UNDISPUTED FACTS ESTABLISH THAT THE PLAN'S CREDIT
UNION OPTION FALLS WITHIN AN ERISA PROHIBITED
TRANSACTION EXEMPTION, THUS PRECLUDING
PLAINTIFFS'PROHIBITED TRANSACTION CLAIM (COUNT III).
Doc. 178 at ECF 3 & Doc. 185-1 at ECF 3.
The joint motion was filed in both a redacted version and
an unredacted version, and,

in each instance, was accompanied by

a brief and a supporting appendix in three volumes.
179

&

182; Doc. 185-1, 185-2, 185-3
2.

&

Docs. 178,

185-4.

Credit Union's Motion

Credit Union filed its motion for summary judgment on
July 3, 2020.
appendix.

Doc. 180.

It was accompanied by a brief and

Docs. 181 & 183.

Credit Union urges as grounds for its motion each of the
following:
B. The Credit Union is Entitled to Summary Judgment on
Count II Because Plaintiffs Lack Article III
Standing to Bring They Have Failed to Establish
That They Suffered an Injury in Fact.
C. The Credit Union is Entitled to Summary Judgment on
Count II Because the Credit Union Is Not a Fiduciary for
the Purposes Alleged in the Complaint.
D. The Credit Union is Entitled to Summary Judgment on
Count II Because the Credit Union Did Not Use Plan
Assets For Its Own Interest Or Its Own Accounts in
Violation of 29 U.S.C. § 1106 (b) (1)

25

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Page 26 of 40 PageID 9741

E. The Credit Union is Entitled to Summary Judgment on
Count II Because the Credit Union's Above-Average
Dividends Show Its Returns Were Reasonable.
Doc. 181 at ECF 2.
P.

Plaintiffs' Oppositions to the Motions
1.

Opposition to the Motion of American and Committee

Plaintiffs' amended opposition to the joint motion of
American and Committee was filed July 21, 2020.

Doc. 215.

It

was accompanied by a supporting memorandum and a three-volume
appendix.

Doc. 212.

Basically, plaintiffs responded by arguing that, at the
least, the summary judgment presents issues of fact to be
decided by the jury as to each of the factors upon which
defendants relied in support of their motions.

Plaintiffs added

that the limitations ground of the motion of American and
Committee is unfounded because of the ongoing duty of a
fiduciary to exercise proper care relative to investment options
and that American and Committee relied on the wrong standard
concerning co--fiduciary liability.

They described the bases of

their opposition as follows:
A. Plaintiffs Have Standing
American Airlines' Standing Argument Fails On the
Facts
American Airlines' Standing Argument Fails On The
Law

26

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

Page 27 of 40 PageID 9742

B. American Airlines' Statute of Limitations Argument
Ignores Supreme Court Precedent On Continuing
Violations of ERISA
C. Plaintiffs' Claim For Breach Of Defendants' Duty Of
Prudence Should Proceed To Trial
Plaintiffs Have Identified An Appropriate
Benchmark-Stable Value
The Performance Of Money Market Funds Is Irrelevant
The Breadth of the Plan's Investment Menu Does Not
Absolve American Airlines Of Liability For An
Imprudent Investment Option
D. American Airlines Applies The Wrong Standard In Its
Argument Concerning Co-Fiduciary Liability
Doc. 215 at ECF 2.
2.

Opposition to Credit Union's Motion

Plaintiffs' opposition to Credit Union's motion and
supporting memorandum and appendix were filed July 21, 2020.
Docs. 213-14.
Again, basically the response was that, at the least, fact
issues have been raised as to factors pertinent to plaintiffs•
claims against Credit Union.

In their supporting memorandum,

plaintiffs describe the bases for their opposition as follows:
A.

Plaintiffs have Article III Standing

B.

The Credit Union is a Fiduciary to the Plan

C.

The Credit Union Dealt in Plan Assets for its own
interest, Which Is A Per Se Violation of ERISA

27

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

D.

Page 28 of 40 PageID 9743

'rhe Credit Union Failed to Discharge its Burden to
Establish that the Rates were Reasonable

Doc. 213 at ECF 2.
II.

Analysis
A.

Summary Judgment Standards
Rule 56(a) of the Federal Rules of Civil Procedure provides

that the court shall grant summary judgment on a claim or
defense if there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.
R. Civ. P. 56(a); Anderson v. Liberty Lobby,
247

(1986).

Fed.

Inc., 477 U.S. 242,

The movant bears the initial burden of pointing out

to the court that there is no genuine dispute as to any material
fact.

Celotex Corp. v. Catrett, 477 U.S. 317, 323, 325

(1986).

The movant can discharge this burden by pointing out the absence
of evidence supporting one or more essential elements of the
nonmoving party's claim, "since a complete failure of proof
concerning an essential element of the nonmoving party's case
necessarily renders all other facts immaterial."

Id. at 323.

Once the movant has carried its burden under Rule 56(a),

the

nonmoving party must identify evidence in the record that
creates a genuine dispute as to each of the challenged elements
of its case.

Id. at 324; see also Fed. R. Civ. P. 56(c)

party asserting that a fact

.

.

("A

. is genuinely disputed must

28

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

support the assertion by
materials in the record .

Page 29 of 40 PageID 9744

. citing to particular parts of
•

,

)

0

If the evidence identified

could not lead a rational trier of fact to find in favor of the
nonmoving party as to each essential element of the nonmoving
party's case, there is no genuine dispute for trial and summary
judgment is appropriate.

Matsushita Elec. Indus. Co. v. Zenith

Radio Corp., 475 U.S. 574, 587, 597 (1986).

In Mississippi

Prot. & Advocacy Sys. v. Cotten, the Fifth Circuit explained:
Where the record, including affidavits,
interrogatories, admissions, and depositions could
not, as a whole, lead a rational trier of fact to find
for the nonmoving party, there is no issue for trial.
929 F.2d 1054, 1058

(5th Cir. 1991).

The standard for granting a motion for summary judgment is
the same as the standard for rendering judgment as a matter of
law.'

Celotex Corp., 477 U.S. at 323.

If the record taken as a

whole could not lead a rational trier of fact to find for the
nonmoving party, there is no genuine issue for trial.
Matsushita, 475 U.S. at 597; see also Mississippi Prot. &

8

ln Boeing Co. v. Shipman, 411 F.2d 365,374-75 (5th Cir. 1969) (en banc);the Fifth Circuit
explained the standard to be applied in determining whether the cmni should enter judgment on motions
for directed verdict or for judgment notwithstanding the verdict by saying:
If the facts and inferences point so strongly and overwhelmingly in favor of one party
that the Comt believes that reasonable men could not arrive at a contrary verdict, granting
of the motions is proper. On the other hand, if there is substantial evidence opposed to
the motions, that is, evidence of such quality and weight that reasonable and fair-minded
men in the exercise of impattial judgment might reach different conclusions, the motions
should be denied, and the case submitted to the jury. A mere scintilla of evidence is
insufticient to present a question for the jmy.

29

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

Page 30 of 40 PageID 9745

Advocacy Sys., 929 F.2d at 1058.
B.

Time-Bar Ground of the Motion of American and Committee Is
Without Merit
American and Committee assert a time-bar ground, contending

that "this Court should reject as time-barred any challenge to
American's •inclusion' of the Credit Union Option in the Plan,"
Doc. 185-1 at 15, insisting that the six-year limitations period
contemplated by 29 U.S.C. § 1113 bars assertion of fault in
including as an investment option the AA Credit Union Fund
option claim because it was first introduced into the Plan more
than thirty-five years ago, with the consequence that the time
to challenge the selection of that option has long since
expired. Id. at 16.
The court does not interpret plaintiffs' criticism of the
existence of the AA Credit Union Fund option as being based
solely on the initial decision of American and Committee to
include that option in the Plan, but interprets the complaint to
be that American and Committee, during the six years before this
action was filed, violated their fiduciary duties by not taking
appropriate steps to remove that option and/or to add to it a
capital preservation investment option that would have been more
financially beneficial to the participants than the AA Credit
Union Fund option.

In other words, plaintiffs' complaint, as

the court understands it, is that during the six years preceding

30

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

Page 31 of 40 PageID 9746

the filing of this action, American and Committee persisted in
what the plaintiffs have characterized as breaches of their
fiduciary duties by continuing to have as an investment option
the AA Credit Union Fund option and/or by failing to add to the
investment options as an income-producing low-risk; liquid fund
option a more financially productive option such as a stable
value fund.

The court concludes that plaintiffs are correct in

claiming that American and Committee have had such an ongoing
and continuing fiduciary obligation, and that the time-bar
ground is without merit.
523,
C.

See Tibble v. Edison Int'l, 575 U.S.

, 135 S. Ct. 1823, 1828-29 (2015).
Plaintiffs' Article III Standing
To establish standing, plaintiffs must show that each has

suffered a concrete, particularized injury, actual or imminent,
fairly traceable to defendants• challenged behavior, and likely
to be redressed by a favorable ruling. Lujan v. Defenders of
Wildlife,

504 U.S. 555, 560"61 (1992). Mere violation of duties

under ERISA is not in and of itself an injury in fact to
plaintiffs. Spokeo, Inc. v. Robins; 136 S. Ct. 1.540, 1547-49
(2016); Lee v. Verizon Commc•ns, Inc., 837 F.3d 523, 530-31 (5'h
Cir. 2016). That ERISA authorizes a participant to sue for
restoration of plan losses does not affect the Article III
standing analysis. Thole v. U.S. Bank N.A.,
Ct. 161.5, 1620 (2020).
31

u.s.

140

s.

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

Page 32 of 40 PageID 9747

Here, plaintiffs allege that they could have earned better
returns had American and the Committee selected a stable value
fund instead of the AA Credit Union Fund option as the prudent
choice for investments in the Plan.' As discussed, infra,
plaintiffs cannot establish that American and Committee were
required to select a stable value fund instead of the AA Credit
Union Fund option. But, even if they could, their alleged
injuries are at best speculative, not concrete. The Plan
provides that participants are responsible for making investment
decisions. That is, participants decide whether to invest, how
much to invest, and in which options to invest. Doc. 185 at 4850. Plaintiffs do not point to any evidence showing that they
would have chosen the stable value fund for their investments."
Instead, the evidence reflects that Ortiz never took even basic
steps to evaluate the stable value fund as an investment option
when it became available. Doc. 185 at 876-77. Scott chose not to
invest in a stable value fund when he had the option to do so.
Id. at 872. Plaintiffs have not established standing to pursue
the claim regarding an alternative capital preservation option,

9

Plaintiffs have from time to time mentioned that a stable value fund is one altemative capital preservation
investment to the AA Credit Union Fund. They have never identified any other such alternative. Their complaint
names only a stable value f1md as the alternative thai should have been offered. Doc. 1 at 12, 1141. And, in fact, their
expeJt on the subject, King, opines that a stable value fund should have been offered instead of the AA Credit Union
Fund.
10 In this regard, the court notes that plaintiffs' list of facts to be proven at trial does not list as a fact to be proved that
either of the plaintiffs would have chosen to invest in a stable value fund or other capital preservation fund instead
of the AA Credit Union Fund option. Doc. 218.

32

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

Page 33 of 40 PageID 9748

i.e., the stable value fund.
Independently, plaintiffs claim that the Credit Union
breached its fiduciary duties by using Plan assets for its own
benefit and failing to pay a reasonable rate of interest on the
AA Credit Union Fund. Despite the Credit Union's arguments to
the contrary, the court is satisfied that plaintiffs have
established standing in that regard. Plaintiffs invested in the
AA Credit Union Fund; they contend that they should have
received a higher rate of interest and that they have been
damaged by receiving a lower rate; and,

if plaintiffs prevail,

their injuries will be redressed.
D.

Breach of Duty Under ERISA

Plaintiffs allege that American and the Committee breached
their fiduciary duties by imprudently and disloyally selecting
and retaining the AA Credit Union Fund instead of a stable value
fund. Doc. 154 at 3. ERISA requires fiduciaries to manage plan
assets with the care, skill, prudence, and diligence that a
prudent man acting in a like capacity and familiar with such
matters would use under the circumstances. Singh v. RadioShack
Corp.,

882 F. 3d 137, 144

(5'h Cir. 2018). A fiduciary is required

to act with prudence, not prescience. Pension Benefit Guar.
Corp. v. Morgan Stanley Inv. Mgmt.,

Inc., 712 F. 3d 705, 716 (2d

Cir. 2013). It must engage in a reasoned decision-making process
for investigating the merits of investment options, ensuring
33

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

Page 34 of 40 PageID 9749

that each one remains in the best interest of plan participants.
Schweitzer v. Inv. Comm. of the Phillips 66 Savs. Plan,

960 F.3d

190, 197 (5th Cir. 2020). To sustain their claim, plaintiffs must
show a breach of duty and loss to the Plan. McDonald v.
Provident Indem. Life Ins. Co., 60 F.3d 234, 237

(5th Cir. 1995).

Plaintiffs seem to think it sufficient to show that
American and Committee failed to engage in a reasoned decisionmaking process. Doc. 215 at 17-18. However, procedural lapses
alone, assuming plaintiffs could establish any, are
insufficient. Plaintiffs must show that the procedural failings
led to Plan losses. Schweitzer, 960 F.3d at 199-200; Kopp v.
Klein, 894 F. 3d 214, 221 (5'h Cir. 2018). Moreover, in this case,
plaintiffs contend that the AA Credit Union Fund should not have
been offered at all by the Plan; hence, they must establish that
no reasonable fiduciary would have included such Fund in the
Plan. See Singh, 882 F.3d at 158; Whitley v. BP, P.L.C.,
F. 3d 523, 529

838

(5th Cir. 2016); Pension Benefit, 712 F.3d at 718.

The opinion of their expert Mr. King that a stable value fund
was a comparable, better-performing principal preservation
alternative to the AA Credit Union Fund does not suffice. Doc.
215 at 18.
Plaintiffs complain that the interest rate on the AA Credit
Union Fund was "abysmally low." But making a bare allegation
does not mean anything without a meaningful benchmark. See Davis
34

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

v. Washington Univ., 960 F.3d 878, 848
v. Wells Fargo

&

Page 35 of 40 PageID 9750

(8'" Cir. 2020); Meiners

Co., 898 F.3d 820, 822

(8'" Cir. 2018).

Plaintiffs do not point to any similar demand deposit funds to
show that they earned a better rate of return. 11 Instead, they
rely on a comparison to stable value funds, even though their
expert admits that the two investment options have different
characteristics. See Cunningham v. Cornell Univ., No. 16-cv-6525
(PKC), 2019 WL 4735876, at *13 n.14

(S.D.N.Y. Sept. 27,

2019) (party alleging imprudence based on retaining a specific
fund must demonstrate that a comparator is an "equivalent
investment vehicle"). Notably, the AA Credit Union Fund is a
liquid demand deposit that is fully guaranteed by the United
States government up to $250,000.00. Stable value funds are a
unique asset class that invests directly in high quality bonds
and include a wrap contract, that is, a limited guarantee from
an insurance company or bank. They are not risk free. By
definition, these are apples and oranges.
That a stable value fund and the AA Credit Union Fund are
not simply interchangeable as plaintiffs contend is further
supported by the cases rejecting challenges to plans that use
money market funds instead of stable value funds. See, e.g.,
White v. Chevron Corp., No. 16-cv-0793-PJH, 2017 WL 2352137, at

11

In fact, plaintiffs' expe1t admits that the returns of the AA Credit Union Fund exceeded the retums of other
demand deposit options during the relevant time period. Doc. 193, APPX 8, 1[15.

35

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

*10

Page 36 of 40 PageID 9751

(N.D. Cal. May 31, 2017} ("No fiduciary selecting a plan's

•safe• option can foresee whether the risks associated with
stable value investment will come to fruition,

and a fiduciary

may reasonable choose to avert those risks in favor of a safer
alternative."}. See also Moitoso v. FMR LLC, No. 18-12122-WGY,
F. Supp. 3d

, 2020 WL 1495938, at *13

(D. Mass. Mar. 27,

2020} ("ERISA does not require a retirement plan to offer an
index fund or a stable value fund"}; Wildman v. Am. Century
Servs., LLC, 362 F. Supp. 3d 685, 704

(W.D. Mo. 2019} (failure to

include index fund or stable value fund does not violate duty of
prudence} .
Plaintiffs' claims against the Credit Union likewise fail
for a number of reasons. First and foremost is that plaintiffs
have not shown that the Credit Union is a fiduciary under ERISA
for the purpose of their claim. They simply cite to ERISA
§

408(b} (4}, Doc. 1 , 9, but that provision does not make the

Credit Union a fiduciary. Rather it sets forth an exemption from
the prohibitions in ERISA § 406 •if such bank or other
institution is a fiduciary of such plan." 29 U.S.C.
§

1108 (b) (4}. As the Fifth Circuit recognizes, a person assumes

fiduciary status under ERISA in three ways:

(1} as a named

fiduciary in the instrument establishing the employee benefit
plan,

(2} by becoming a named fiduciary pursuant to a procedure

specified in the plan, or (3} as a functional fiduciary under
36

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

Page 37 of 40 PageID 9752

the broad authority, control, or advice provisions of ERISA
§

3 (21) (A). Perez v. Bruister, 823 F.3d 250, 259 (5'h Cir. 2016)

Just because the Credit Union holds Plan assets as deposits does
not make it a fiduciary under ERISA. Carroll L. Wood, III,
D.D.S. v. CNA Ins. Cos., 837 F.2d 1402
Enron Corp.

(5th Cir. 1988); Tittle v.

(In re Enron Corp. Sees., Derivative & ERISA

Litig.), 284 F. Supp. 2d 511, 570

(S.D. Tex. 2003). Other

circuits agree. McLemore v. Regions Bank, 682 F.3d 414, 423-24
(6'h Cir. 2012); Srein v. Frankford Trust Co., 323 F.3d 214, 222
(3d Cir. 2003); Arizona State Carpenters Pension Tr. Fund v.
Citibank (Arizona), 125 F.3d 715, 721-22

(9'h Cir. 1997). Rather,

a debtor/creditor relationship exists between a depositor of
funds and the financial institution. Tex. Commerce Bank-Hurst,
N.A. v. United States, 703 F. Supp. 592, 594

(N.D. Tex. 1988);

Sears v. Continental Bank & Tr. Co., 562 S.W.2d 843,

844

(Tex.

1977) . Plaintiffs do not contend that the Credit Union is or
became a named fiduciary. They have not shown that it is a
functional fiduciary.
Further, plaintiffs have not shown that the Credit Union
owed them a duty to pay them more than the AA Credit Union Fund
rate. Their comparison of the AA Credit Union Fund to other
accounts is a red herring as those accounts have different
characteristics. And, there is no evidence that Credit Union
manipulated the rate of return on the AA Credit Union Fund to
37

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

Page 38 of 40 PageID 9753

benefit itself at the expense of plaintiffs or the Plan. Rather,
the evidence is that the Credit Union set the rate on a monthly
basis taking into account the dividend rates offered by other
credit unions and financial institutions to remain competitive.
Doc. 183 at App.-AAFCU 000002-3. Plaintiffs do not dispute that
the announced rate was the rate paid. Setting a monthly dividend
rate does not make the Credit Union a fiduciary.

Insinga v.

United of Omaha Life Ins. Co., No. 8:17CV179, 2017 WL 6884626
(D. Neb. Oct. 26, 2017). There is no evidence that the Plan
fiduciaries could not have rejected the rates set by the Credit
Union or that plaintiffs could not have made different
investment choices if they thought the rates were too low. See
Teets v. Great-West Life & Annuity Ins. Co.,
(10~

921 F.3d 1200, 1212

Cir. 2019).
Finally, plaintiffs' argument that the Credit Union dealt

in Plan assets for its own interest exhibits a fundamental
misunderstanding of the nature of depositary agreements and
duties of a financial institution. The record reflects that the
Credit Union maintained deposits in cash reserves and short-term
investments to meet the liquidity needs of Plan participants.
Deposits were always available for withdrawal. Plaintiffs have
not shown that the Credit Union's investing of amounts deposited
was improper or a violation of any duty owed to them or the
Plan.
38

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

E.

Page 39 of 40 PageID 9754

Co-Fiduciary Liability
To establish co-fiduciary liability against American and

Committee under ERISA, plaintiffs must first establish the
underlying breach of fiduciary duty by the Credit Union. In re
Dell, Inc. ERISA Litig., 563 F. Supp. 2d 681, 695

(W.D. Tex.

2008) . For the reasons discussed, supra, plaintiffs have failed
to do so, but even if they had, they still could not prevail.
Pursuant to section 405(a) of ERISA, co-fiduciary liability
arises in the following circumstances:
(1) if he participates knowingly in, or knowingly
undertakes to conceal, an act or omission of such
other fiduciary, knowing such act or omission is a
breach
(2) if, by his failure to comply with section
1104(a) (1) of this title in the administration of his
specific responsibilities which give rise to his
status as a fiduciary, he has enabled such other
fiduciary to commit a breach; or
(3) if he has knowledge of a breach by such other
fiduciary unless he makes reasonable efforts under the
circumstances to remedy the breach.
29 U.S.C.

§

1105(a). Inasmuch as Credit Union was not a plan

fiduciary for purposes of plaintiffs• claims, the provision
simply does not apply. Further, the statute does not support
vicarious liability, Donovan v. Cunningham, 716 F.2d 1455, 1475
(5th Cir. 1983), and plaintiffs have not come forward with
evidence to show that American and Committee knew that Credit
Union's conduct constituted a fiduciary breach in any event.

39

Case 4:16-cv-00151-A Document 231 Filed 08/05/20

F.

Page 40 of 40 PageID 9755

Prohibited Transaction
In Count III of their complaint, Doc. 1 at 14-15,

plaintiffs allege that American and Committee engaged in a
prohibited transaction under ERISA§ 406(a), 29 U.S.C.
§ 1106(a). Plaintiffs made no response to the ground of the
summQ.ry judgment motion urging that they could not establish
this claim. Apparently, they intend to abandon it. For the
reasons discussed, supra, plaintiffs have not shown that the
interest earned on the AA Credit Union Fund was not reasonable
when compared to similar demand deposit accounts. See Doc. 185
at App. 412-13
III.

Order
The court ORDERS that defendants' motions for summary
judgment be, and are hereby, granted; that plaintiffs take
nothing on their claims against defendants; and that plaintiffs'
claims be, and are hereby, dismissed with prejudice.
SIGNED August 5, 2020.

40