Opinion
1:21-CV-05343-ELR
2023-01-30
Marcia G. FLEMING, Casey Freeman, David Guyon, Anthony Loscalzo, Patrick Roseberry, and Julio Samaniego, individually, on behalf of the Rollins, Inc. 401(k) Savings Plan, and on behalf of all similarly situated participants and beneficiaries of the Plan, Plaintiffs, v. ROLLINS, INC., et al., Defendants.
Jon D. Pels, Katerina M. Newell, The Pels Law Firm, Bethesda, MD, Paul Joseph Sharman, The Sharman Law Firm, LLC, Alpharetta, GA, for Plaintiffs. Jeffrey S. Russell, Pro Hac Vice, Bryan Cave Leighton Paisner LLP, St. Louis, MO, Ann Wrege Ferebee, Michael Peter Carey, William Bard Brockman, Bryan Cave Leighton Paisner LLP, Atlanta, GA, for Defendants Rollins, Inc., The Administrative Committee of The Rollins, Inc. 401(k) Savings Plan, Paul E. Northen, John Wilson, Jerry Gahlhoff, James Benton, A. Keith Payne. Alexandra Belzley, Pro Hac Vice, Christopher J. Boran, Pro Hac Vice, Kevin F. Gaffney, Pro Hac Vice, Morgan, Lewis & Bockius LLP, Chicago, IL, Cameron Blaine Roberts, Michael A. Caplan, Julia Blackburn Stone, Caplan Cobb LLP, Atlanta, GA, for Defendants Alliant Insurance Services, Inc., Alliant Retirement Services, LLC. Caroline Anna Wong, Pro Hac Vice, Mark Bruce Blocker, Sidley Austin LLP, Chicago, IL, Fredric Joseph Bold, Jr., Jeffrey W. Chen, Bondurant Mixson & Elmore, LLP, Atlanta, GA, Kamal Ghali, Chaiken Ghali LLP, Atlanta, GA, for Defendants Empower Retirement, LLC, Prudential Bank & Trust, FBS.
Jon D. Pels, Katerina M. Newell, The Pels Law Firm, Bethesda, MD, Paul Joseph Sharman, The Sharman Law Firm, LLC, Alpharetta, GA, for Plaintiffs.
Jeffrey S. Russell, Pro Hac Vice, Bryan Cave Leighton Paisner LLP, St. Louis, MO, Ann Wrege Ferebee, Michael Peter Carey, William Bard Brockman, Bryan
Cave Leighton Paisner LLP, Atlanta, GA, for Defendants Rollins, Inc., The Administrative Committee of The Rollins, Inc. 401(k) Savings Plan, Paul E. Northen, John Wilson, Jerry Gahlhoff, James Benton, A. Keith Payne.
Alexandra Belzley, Pro Hac Vice, Christopher J. Boran, Pro Hac Vice, Kevin F. Gaffney, Pro Hac Vice, Morgan, Lewis & Bockius LLP, Chicago, IL, Cameron Blaine Roberts, Michael A. Caplan, Julia Blackburn Stone, Caplan Cobb LLP, Atlanta, GA, for Defendants Alliant Insurance Services, Inc., Alliant Retirement Services, LLC.
Caroline Anna Wong, Pro Hac Vice, Mark Bruce Blocker, Sidley Austin LLP, Chicago, IL, Fredric Joseph Bold, Jr., Jeffrey W. Chen, Bondurant Mixson & Elmore, LLP, Atlanta, GA, Kamal Ghali, Chaiken Ghali LLP, Atlanta, GA, for Defendants Empower Retirement, LLC, Prudential Bank & Trust, FBS.
ORDER
Eleanor L. Ross, United States District Judge
There are several matters presently before the Court. The Court sets forth its reasoning and conclusions below.
I. Background
For purposes of the present motions only, the Court "accept[s] the allegations in the complaint as true and constru[es] them in the light most favorable to the plaintiff." Hill v. White, 321 F.3d 1334, 1335 (11th Cir. 2003). Plaintiffs' Amended Complaint contains 503 paragraphs and spans 135 pages. See generally Am. Compl. [Doc. 53]. The Court discusses only the relevant allegations herein.
Plaintiffs Marcia G. Fleming, Casey Freeman, David Guyon, Anthony Loscalzo, Patrick Roseberry, and Julio Samaniego bring this putative class action pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA"). See Am. Compl. p. 5 [Doc. 53]. Plaintiffs are former and current participants in the Rollins, Inc. 401(k) Savings Plan (the "Plan"). Id. ¶ 1. Plaintiffs allege that Defendants Rollins, Inc., the Rollins Administrative Committee of the Plan and its individual members (Paul E. Northern, John Wilson, Jerry Gahlhoff, James Benton, and A. Keith Payne) (collectively, the "Rollins Defendants"); Empower Retirement, LLC f/k/a Prudential Insurance and Annuity Company ("PRIAC") and Prudential Bank & Trust, FSB ("PB & T") (together, the "Prudential Defendants"); LPL Financial LLC ("LPL"); and Alliant Insurance Services, LLC and Alliant Retirement Services, Inc. (together, the "Alliant Defendants") violated ERISA throughout their administration of and involvement with the Plan. See generally id.
A. The Plan
The Plan is an ERISA "defined contribution, individual account, employee benefit plan[.]" Id. ¶ 1. Plan participants such as Plaintiffs pay retirement funds into the Plan which are held in a trust administered by their employer and an advisory committee: the Rollins Defendants. See id. ¶¶ 28-29; [Doc. 53-1 at 61]. The Rollins Defendants hold "complete control of the administration of the Plan," including the authority to choose the funds in which to invest Plan participants' contributions, monitor expenses, and employ various entities to service the Plan. See Am. Compl. ¶¶ 45-47; [see also generally Doc. 53-1 at 61-62]; 29 U.S.C. § 1002.
Plaintiffs attached the Plan's governing document to their Amended Complaint. [See Doc. 53-1]. Because "[a] district court can generally consider exhibits attached to a complaint in ruling on a motion to dismiss," the Court finds it appropriate to consult the Plan's governing document at this stage. Hoefling v. City of Mia., 811 F.3d 1271, 1277 (11th Cir. 2016).
Several entities serviced the Plan at issue, including Defendant LPL and the Alliant Defendants (as investment advisors and managers), PRIAC (as the Plan's record-keeper), and PB & T (as the Plan's directed trustee). See Am. Compl. ¶¶ 28-29, 53-56.
Throughout the Amended Complaint, Plaintiffs rarely provide exact dates for their allegations. Instead, they generally refer to Defendants' conduct during the "Class Period," which Plaintiffs define as "January 1, 2009 to the present." See Am Compl. ¶ 12.
Plan participants "bear not only the investment risk of the Plan administrators' decisions but also the costs of any excessive investment and administrative expenses as well." Am. Compl. ¶ 3. Indeed, "[a] fiduciary's mismanagement of plan assets leading to an investment lineup filled with poor-performing investments and excessive fees" can significantly diminish participants' expected return. See id. ¶ 7.
B. Plan Investments and Expenses
Plan participants can choose to invest their contributions in one or more of "a menu of investment options ... [that] were selected and maintained by [the Rollins Defendants] with input ... and advice" from the Prudential Defendants, LPL, and the Alliant Defendants. See id. ¶ 87. If a Plan participant does not make specific investment choices, their contributions are automatically invested in GoalMaker, a default asset allocation program that purportedly invests funds based on a participant's age and risk tolerance and that was allegedly "provided" to the Plan and the Rollins Defendants by PRIAC. See id. ¶¶ 90-94. Plaintiffs allege that since January 1, 2009, more than seventy percent (70%) of Plan participants have been enrolled in GoalMaker. See id. ¶ 92. Once enrolled in GoalMaker, Plan participants are not able to "change the recommended allocations without being disenrolled in the service." See id. ¶ 95. Plaintiffs allege that GoalMaker was populated with only actively managed mutual funds which seek to "beat the market" and achieve higher returns by engaging in frequent purchases and sales. See id. ¶ 96. These funds offer a riskier investment management strategy and charge higher fees (such as distribution and transaction fees) compared to passively managed funds such as index funds. See id. ¶¶ 97-98. Within these mutual funds, investors may also choose between different classes of funds (such as retail and institutional funds) that charge different fees, offer different services, and result in varying expense ratios and revenue sharing amounts. See id. ¶¶ 152-54.
Mutual fund expense ratios are calculated by "dividing the fund's operating expenses by the average dollar value of its assets." Id. ¶ 112. These published ratios reflect various fees that a mutual fund might pay and "are strong predictors of performance." See id. ¶¶ 111-13. Revenue sharing is explained in further detail below.
The largest fund in GoalMaker throughout the Class Period was PRIAC's Guaranteed Income Contract (the "GIC"). See id. ¶ 174. The GIC is a "stable value fund," which is a "conservative, capital preservation investment product typically composed of high quality, low risk investments" and is "designed to provide steady, positive returns and pay a contractually guaranteed return known as a crediting rate." Id. ¶ 175. PRIAC allegedly received a "spread fee" representing the difference between this crediting rate and the generated GIC fund returns. See id. ¶¶ 177-78. According to Plaintiffs, PRIAC had the "sole discretion" to set this crediting rate. See, e.g., id.
Additionally, the Plan pays recordkeeping and investment advisory fees to LPL, the Alliant Defendants, and the Prudential Defendants for their various services. See
id. ¶ 205. Each of these Defendants are compensated through revenue sharing agreements as well as other indirect compensation generated by the Plan's investments. See id. ¶¶ 208, 219, 241, 246, 263, 346. Revenue sharing agreements generally pay service providers such as LPL, the Alliant Defendants, and the Prudential Defendants through revenue generated by the mutual funds that the Plan is invested in rather than by billing the Plan administrators directly. See id. ¶¶ 208-14. According to Plaintiffs, these fee arrangements are preferred by service providers because "they readily can obtain an increase in revenue without having to ask their plan clients to take affirmative steps to pay a higher fee[.]" Id. ¶ 213.
The gravamen of Plaintiffs' claims is their allegation that the Rollins Defendants, with the assistance of all other Defendants, caused the Plan to imprudently invest in high-expense, poorly performing funds, including those offered by the Prudential Defendants through GoalMaker. See generally id. Plaintiffs contend that these funds paid excessive revenue sharing fees and other indirect compensation and benefits to LPL, the Alliant Defendants, and the Prudential Defendants at the expense of the Plan's participants. See generally id. They assert that the Rollins Defendants engaged the Plan in this arrangement because they failed to implement a prudent process for making investment decisions and had a self-serving interest in keeping the Plan from being directly billed for fees so they could conceal the high costs that were passed off to Plan participants and "taken out of revenue generated by the investment funds" rather than billing the Rollins Defendants directly for the recordkeeping and investment advisor services offered by LPL, the Alliant Defendants, and the Prudential Defendants. See id. ¶¶ 245-50.
II. Procedural History
On December 10, 2020, pursuant to Section 11.7 of the Plan, Plaintiffs submitted pre-suit claims based on alleged violations and breaches of ERISA and the Plan to the Administrative Committee for review. See id. ¶ 80; [Doc. 53-1 at 56-59]. Following the Administrative Committee's denial of their claims, Plaintiffs filed the instant suit on December 30, 2021. See Am. Compl. ¶¶ 80-83; see also generally Compl. [Doc. 1].
In their Amended Complaint, Plaintiffs bring seven (7) Counts for various purported violations of ERISA based on Defendants' alleged breaches of fiduciary duties and engagement in prohibited transactions. See Am. Compl. ¶¶ 390-501. In response to Plaintiffs' Amended Complaint, the Rollins Defendants, LPL, the Alliant Defendants, and the Prudential Defendants filed separate motions to dismiss. [Docs. 75, 76, 77, 78]. Plaintiffs oppose each of these motions. [Docs. 79, 80, 81, 82]. Having been fully briefed, Defendants' motions are now ripe for the Court's review. The Court first sets forth the relevant legal standard before turning to Defendants' motions.
The Court notes that Plaintiffs' briefs in response to each motion to dismiss make a habit of citing paragraphs in their Amended Complaint that largely do not support the proposition asserted.
III. Legal Standard
To survive a Rule 12(b)(6) motion to dismiss, a complaint must "contain sufficient factual matter, accepted as true, 'to state a claim to relief that is plausible on its face.'" See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Put differently, a
plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." See id. This socalled "plausibility standard" is not akin to a probability requirement; rather, the plaintiff must allege sufficient facts such that it is reasonable to expect that discovery will lead to evidence supporting the claim. See id.
When considering a 12(b)(6) motion to dismiss, the Court must accept as true the allegations set forth in the complaint, drawing all reasonable inferences in the light most favorable to the plaintiff. See Twombly, 550 U.S. at 555-56, 127 S.Ct. 1955; United States v. Stricker, 524 F. App"x 500, 505 (11th Cir. 2013) (per curiam). Even so, a complaint offering mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action" is insufficient. See Ashcroft, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955); accord Fin. Sec. Assur., Inc. v. Stephens, 500 F.3d 1276, 1282-83 (11th Cir. 2007). Rather, "a pleading must contain a short and plain statement of the claim showing that the pleader is entitled to relief" so as to satisfy "the pleading requirements of Rule 8." See Parker v. Brush Wellman, Inc., 377 F. Supp. 2d 1290, 1294 (N.D. Ga. 2005) (citing FED. R. CIV. P. 8(a)(2)).
IV. Discussion
Below, the Court addresses each of the Rollins Defendants, LPL, the Alliant Defendants, and the Prudential Defendants' motions to dismiss in turn.
A. The Rollins Defendants' Motion to Dismiss [Doc. 75]
Plaintiffs bring all seven (7) Counts in their Amended Complaint against the Rollins Defendants. See generally Am. Compl. The Court first addresses the Rollins Defendants' request that the Court consider documents outside the Amended Complaint in adjudicating their present motion to dismiss. It then considers the Rollins Defendants' exhaustion of administrative remedies and statute of repose related arguments before turning to their specific assertions as to each of Plaintiffs' seven (7) Counts.
1. Documents outside the Amended Complaint
The Rollins Defendants urge the Court to consider the entire administrative record associated with Plaintiffs' 2020 proceeding before the Administrative Committee because (1) portions of the meeting minutes from the administrative record are attached to Plaintiffs' Complaint (but not to Plaintiffs' Amended Complaint), (2) the administrative record is central to Plaintiffs' allegations, and (3) the Administrative Committee's record is the only basis for assessing ERISA violations. [See Docs. 75-1 at 10-12; 85 at 4-7]. The Court disagrees. Contrary to Defendants' assertion, when evaluating the merits of an ERISA claim, a court is not limited solely to the administrative record. See Adams v. Hartwood, 589 F. Supp. 2d 1366, 1367 (N.D. Ga. 2008) (recounting caselaw that allows ERISA plaintiffs to conduct discovery regarding an administrator's fiduciary duties, procedures in compiling the record, whether the record is complete, and the circumstances surrounding conflicts of interest) (citing Met Life Ins. Co. v. Glenn, 554 U.S. 105, 113-15, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008) and Lake v. Hartford Life & Accident Ins. Co., 218 F.R.D. 260, 261 (M.D. Fla. 2003)). Therefore, it would be inappropriate for the Court to weigh competing factual claims and judge Plaintiffs' allegations solely by the record compiled by the very Defendants whom Plaintiffs allege to have breached various fiduciary and ERISA duties, particularly at this early stage. See
Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009) ("ERISA plaintiffs generally lack the inside information necessary to make out their claims in detail unless and until discovery commences."). Further, these meeting minutes were attached to the original Complaint rather than the operative Amended Complaint, and they are not central to Plaintiffs' allegations which concern Defendants' mismanagement of the Plan rather than their adjudication of Plaintiffs' claims. In short, the Court agrees with Plaintiffs that "the meeting minutes in the administrative record do not tell the whole story." [See Doc. 79 at 14].
2. Exhaustion of remedies
Defendants argue that Plaintiffs' claims should be dismissed for failure to exhaust remedies to the extent the claims rely on four (4) specific violations and breaches because those violations and breaches "constitute new claims" that were not raised before the Administrative Committee prior to Plaintiffs filing this suit. [See Doc. 75-1 at 28-32]. Plaintiffs allege to have "submitted the claims with respect to the violations and breaches alleged [in the Amended Complaint] to the Administrative Committee." Am. Compl. ¶ 80. The Court finds that, at this stage, Plaintiffs' pleading is sufficient to withstand Defendants' motion. See Hoak v. Plan Adm'r of the Plans of NCR Corp., Civil Action No. 1:15-CV-03983-AT, 2017 WL 6033903, at *3, 2017 U.S. Dist. LEXIS 208924, at *5 (N.D. Ga. May 3, 2017) ("This Court has previously found that the Eleventh Circuit only expressly required plaintiffs to properly plead (rather than prove) exhaustion of administrative remedies under ERISA to survive dismissal." (emphasis in original)).
3. Time-barred claims
Next, the Rollins Defendants argue that claims involving conduct before December 30, 2015—six (6) years prior to when Plaintiffs filed their original Complaint in this case on December 30, 2021—are time-barred, as any such conduct falls outside of ERISA's six (6)-year statute of repose. [See Doc. 79 at 33]. Although ERISA's statute of repose generally requires a plaintiff to file suit within six (6) years of the fiduciary's latest act or omission allegedly constituting the breach of duty, it provides an exception where, "in the case of fraud or concealment," an ERISA "action may be commenced not later than six years after the date of discovery of [the] breach or violation" giving rise to the action. 29 U.S.C. § 1113. Here, Plaintiffs allege throughout their Amended Complaint that they "did not discover [the Rollins Defendants'] misconduct until 2019" because the Rollins Defendants "concealed" their purported ERISA violations. [See Doc. 79 at 20]; see, e.g., Am. Compl. ¶ 79. The Court finds that Plaintiffs' allegations in this regard are sufficient at this stage to avoid dismissal on statute of repose grounds. See Dist. 65 Ret. Trust v. Prudential Secs., Inc., 925 F. Supp. 1551, 1561 (N.D. Ga. 1996) (holding that the ERISA statute of limitations did not accrue until the "plaintiff discovered the breach or violation" and the plaintiff's allegations of concealment by the defendant were sufficient at the motion to dismiss stage). Because Plaintiffs claim that the Rollins Defendants' concealment prevented them from discovering the various breaches alleged in the Amended Complaint until 2019, they have sufficiently alleged that their claims are timely.
4. Count I: Breach of fiduciary duty of prudence
Having resolved the Rollins Defendants' arguments that apply to more than one claim, the Court now turns to their claimspecific arguments, beginning with Count I. In Count I, Plaintiffs allege that the
Rollins Defendants breached their fiduciary duty of prudence by failing to make investment decisions "based solely on the merits of each investment and what was in the interest of Plan participants," to "monitor or control" excessive costs, to investigate and monitor selected service providers and fiduciaries, and to implement a "proper system of review" to ensure prudent investment decisions. See Am. Compl. ¶¶ 400-01. In their motion to dismiss, the Rollins Defendants argue that Plaintiffs fail to sufficiently state a claim for relief because Count I is purportedly only supported by (1) an inference of imprudence based on underperforming funds, (2) a "broadside" attack on actively managed funds such as those in GoalMaker that include certain expenses relative to the potential benefits, and (3) the assumption that revenue sharing agreements are per se improper. [See Doc. 75-1 at 14-21].
The Rollins Defendants do not dispute that they are a fiduciary within the meaning of ERISA. [See generally Doc. 75-1].
In general, ERISA fiduciaries must exercise "the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." 29 U.S.C. § 1104(a)(1)(B). This fiduciary duty includes "a continuing duty to monitor investments and remove imprudent ones." See Tibble v. Edison Int'l, 575 U.S. 523, 529, 135 S.Ct. 1823, 191 L.Ed.2d 795 (2015). "'Mere stock fluctuations, even those that trend downward significantly, are insufficient to establish' that a fiduciary abused its discretion[.]" See Lanfear v. Home Depot, Inc., 679 F.3d 1267, 1282 (11th Cir. 2012) (quoting Wright v. Or. Metallurgical Corp., 360 F.3d 1090, 1099 (9th Cir. 2004)). However, allegations that a fiduciary utilizes a flawed process in selecting and retaining underperforming funds or chose fund or expense options that "favor the fund provider or the fiduciary over the participants" are sufficient for a breach of the duty of prudence claim to survive a motion to dismiss. See Henderson v. Emory Univ., 252 F. Supp. 3d 1344, 1350-52 (N.D. Ga. 2017); Pledger v. Reliance Trust Co., 240 F. Supp. 3d 1314, 1326 (N.D. Ga. 2017) (holding that allegations that a fiduciary "chose investment options with poor performance histories as opposed to other better performing alternatives [were sufficient to] state[] a claim for fiduciary breach when there is also an allegation that the choice benefitted one or more corporate or fiduciary interests over those of the plan").
Here, Plaintiffs plausibly state a claim for relief in Count I against the Rollins Defendants for breach of the fiduciary duty of prudence. Plaintiffs allege that the Rollins Defendants failed to undertake a meaningful, effective, and prudent review process in selecting and retaining certain investment funds (such as actively managed funds), revenue sharing agreements, and expense fee arrangements. See, e.g., Am. Compl. ¶¶ 42, 93, 103-104. Contrary to the Rollins Defendants' assertions, Plaintiffs do not rest their claims solely on the mere existence of underperforming funds, revenue sharing agreements, and expensive fees associated with actively managed funds. [See Doc. 75-1 at 14-21]. Instead, Plaintiffs allege that the Plan's initial and continuing involvement in these investment arrangements was the effect of both an allegedly imprudent process and the Rollins Defendants' purported self-interest, the sources of the Rollins Defendants' alleged breach of duty. See Am. Compl. ¶¶ 93, 136, 140, 400; [Doc. 79 at 24] ("Plaintiffs do not challenge the
prudence of the investments in the Plan, but rather, Rollins' flawed process in selecting and retaining them."). Indeed, Plaintiffs allege that the Rollins Defendants decision to forego better alternatives in favor of GoalMaker and its "more expensive, worse performing funds" as well as "risky" funds with "poor performance history and excessive revenue sharing fees" despite allegedly better and known alternatives was due to (1) "the need to pay revenue share to [the] Prudential" Defendants and allow the Rollins Defendants to "pass the Plan's administrative and investment fees to participants and beneficiaries" and (2) the Rollins Defendants' failure to adequately investigate and consider all available options and weigh the costs and benefits of their decisions. See Am. Compl. ¶¶ 93, 136, 140, 400.
The Rollins Defendants' argument that "Plaintiffs point to no defect in the process used by the Committee" is unavailing at this procedural stage. [See Docs. 75-1 at 14; 85 at 8-9]. An ERISA plaintiff can avoid dismissal of a breach of the duty prudence claim so long as he identifies "circumstantial evidence"—such as underperforming funds and high management fees—that suggests an imprudent process. See Pizarro v. Home Depot, Civil Action No. 1:18-CV-01566-WMR, 2019 WL 11288656, at *9-12 (N.D. Ga. Sept. 20, 2019). Any other result would be unfair because a plaintiff "likely ha[s] no access to [the defendant's] particular decision-making process at" the pleadings stage. See id. Here, Plaintiffs identify underperforming Plan funds relative to similar available funds and benchmarks, high fees in relation to services obtained, and the excessive revenue-sharing agreements and compensation that purportedly benefited all Defendants at the expense of Plan participants as evidence of both the Rollins Defendants' alleged failure to exercise prudence in their decision-making process and their motive for doing so. See, e.g., Am. Compl. ¶¶ 116-20, 148, 169, 192, 237, 239, 265, 267, 301, 311-27. The Court finds that these factual allegations could lead to a reasonable inference of imprudence in the Rollins Defendants' Plan investment decision-making process. See Pizarro, 2019 WL 11288656 at *12 (refusing to dismiss the plaintiff's claims for breach of fiduciary duties because they "alleged high fees, chronic underperformance against benchmarks and comparable funds, and specific" warnings as "circumstantial evidence of imprudence" sufficient to support a reasonable inference that a "prudent fiduciary would have made different decisions").
In sum, Plaintiffs' allegations that the Rollins Defendants continuously made Plan investment decisions to benefit themselves and others rather than Plan participants and at all times failed to adequately consider more lucrative alternatives that they knew or should have known existed are sufficient to state a claim for breach of fiduciary duty in Count I. See Tibble, 575 U.S. at 529, 135 S.Ct. 1823; Henderson, 252 F. Supp. 3d at 1350-52; Pledger, 240 F. Supp. 3d at 1326.
5. Count II: Breach of the duty of loyalty
Plaintiffs next allege in Count II that the Rollins Defendants breached their duty of loyalty by "put[ting] the interests of [the Prudential Defendants, the Alliant Defendants, and LPL] ahead of those of the Plan and Plan participants by choosing investment products and pension plan services offered by" those Defendants which "generated substantial revenues" for all Defendants "at great cost to the Plan and Plan participants." See Am. Compl. ¶ 430. According to Plaintiffs, these investment products and services "were more expensive than necessary and otherwise were not justified on the basis of their historical performance." See id. ¶ 432. The Rollins Defendants contend that Plaintiffs fail to state a claim for breach of the duty of
loyalty because Plaintiffs' claim is premised merely on the concept of permissible revenue sharing agreements. [See Doc. 75-1 at 25].
In relevant part, ERISA requires that fiduciaries act "for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan[.]" 29 U.S.C. § 1104(a)(1)(A). This "duty of loyalty" is rooted in the common law of trusts and is "[t]he most fundamental duty owed by the [fiduciary] to the beneficiaries.... It is the duty of a [fiduciary] to administer [the plan] solely in the interest of the beneficiaries." See Pegram v. Herdich, 530 U.S. 211, 224, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000) (internal marks and citation omitted). "Many forms of conduct permissible in a workaday world for those acting at arm's length, are forbidden to those bound by fiduciary ties. A [fiduciary] is held to something stricter than the morals of the market place." Id. at 224-25, 120 S.Ct. 2143 (quoting Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545, 546 (1928) (Cardozo, J.)).
Here, Plaintiffs sufficiently allege that the Rollins Defendants breached their duty of loyalty. In essence, Plaintiffs allege a quid pro quo: the Rollins Defendants intentionally chose and retained unnecessarily expensive products and funds offered by the other Defendants in order to generate revenue for those Defendants who, in turn and as consideration, passed these high costs and fees off on to Plan participants in the form of "hidden, excessive revenue sharing fees" by taking the expenses "out of the revenue generated by the [Plan's] investment funds" rather than billing the Rollins Defendants directly. See Am. Compl. ¶¶ 245-50, 429-32. Plaintiffs allege that the Rollins Defendants did not want the Plan directly billed to hide these allegedly excessive fees and that the fees were otherwise concealed because they did not appear on Plan participants' account statements. See id. ¶¶ 248-51. Contrary to Defendants' argument, Plaintiffs do not contest the concept of revenue sharing in general. Rather, Plaintiffs contest the purportedly excessive costs associated with the specific revenue sharing agreements here, which Plaintiffs claim the Rollins Defendants chose and maintained for their own benefit to the detriment of Plan participants who bore the cost. [See Doc. 79 at 31].
Accordingly, the Court finds that Plaintiffs' allegations are sufficient to state a claim for breach of the duty of loyalty. See Pledger, 240 F. Supp. 3d at 1332 (refusing to dismiss breach of fiduciary duty of loyalty claims because "Plaintiffs have alleged not just that the percentage of fees was excessive, but that Defendants are liable for self-dealing and a failure to choose available, less expensive options.").
6. Count III: Failure to monitor other named plan fiduciaries
In Count III, Plaintiffs bring a claim for failure to monitor against the Rollins Defendants. See Am. Compl. ¶¶ 438-50. Plaintiffs allege that the Rollins Defendants failed to monitor (1) the performance of other Defendants who purportedly committed breaches of fiduciary duty, (2) the "processes by which Plan investments were evaluated," and (3) "the availability of lower-cost separate account and collective trust vehicles[.]" See id. ¶ 444. The Rollins Defendants move to dismiss Count III for Plaintiffs' purported failure to allege that the fees charged by other Defendants were excessive and that the Rollins Defendants failed to monitor these Defendants by not renegotiating the fees or switching to other service providers. [See Doc. 75-1 at 23-24].
"A person with discretionary authority to appoint, maintain, and remove plan fiduciaries is himself deemed a fiduciary
with respect to the exercise of that authority. Implicit in the fiduciary duties attaching to persons empowered to appoint and remove plan fiduciaries it the duty to monitor appointees." Woods v. S. Co., 396 F. Supp. 2d 1351, 1371 (N.D. Ga. 2005) (quoting In re Xcel Energy, Inc., Securities, Derivative & "ERISA" Litigation, 312 F. Supp. 2d 1165, 1176 (D. Minn. 2004) (internal quotation marks omitted)). A claim for a breach of the duty to monitor requires that a plaintiff "alleg[e] that an appointing fiduciary 'knew or should have known' of underlying breaches and that 'such knowledge should have triggered an investigation to determine whether other fiduciaries were administrating the Plan in accordance with ERISA and the terms of the Plan.'" Gamache v. Hogue, 446 F. Supp. 3d 1315, 1328 (M.D. Ga. 2020) (quoting Perez v. Geopharma, Inc., No. 8:14-CV-66-T-33TGW, 2014 WL 3721369, at *4 (M.D. Fla. July 25, 2014)).
Here, Plaintiffs allege that the Rollins Defendants failed to establish an effective system of review and to replace appointed Plan service providers despite knowledge of those services providers' "incompeten[ce]" and significant economic harm to the Plan and its participants caused by the "excessive fees" these service providers charged "relative to the ... services [the Plan] received" and the providers' "inadequate" performance. See Am. Compl. ¶¶ 234-37, 301, 444. The Court finds that these allegations suggest that the Rollins Defendants knew or should have known of alleged ERISA breaches and violations by various other Defendants and are sufficient to state a claim for the breach of the duty to monitor. See Gamache, 446 F. Supp. 3d at 1328 (finding breach of the duty to monitor sufficiently plead where a plaintiff alleged failure to review another fiduciary's performance, protect Plan participants, and remedy the violations).
7. Count IV: Violation of the Plan
ERISA requires that a fiduciary "discharge his duties ... in accordance with the documents and instrument governing the plan[.]" 29 U.S.C. § 1104(a)(1)(D). In Count IV, Plaintiffs allege that the Rollins Defendants violated 29 U.S.C. § 1104(a)(1)(D) by failing to adhere to the terms of the Plan. See Am. Compl. ¶¶ 451-65. Specifically, Plaintiffs allege that the Rollins Defendants failed to (1) "make sure Plan expenses were reasonable" and (2) ensure that each investment manager "certif[ied that] it [wa]s qualified to act as an investment manager within the meaning of" 29 U.S.C. § 1002(38). See id. ¶¶ 457-58. The Rollins Defendants contend that this Count fails for the same reasons as Count I and that the Alliant Defendants and LPL were not "investment managers" within the meaning of ERISA. [See Doc. 85 at 11 n.4].
First, Plaintiffs sufficiently allege throughout their Amended Complaint that the various expenses charged to Plan participants were not "reasonable," as required by Section 12.7(b)(3) of the Plan. [See Doc. 53-1 at 63]; see also, e.g., Am. Compl. ¶¶ 234-37. Second, Plaintiffs sufficiently allege that the Rollins Defendants failed to ensure that chosen investment managers were properly qualified consistent with Section 7.8(a) of the Plan and 29 U.S.C. § 1002(38). [See Doc. 53-1 at 40];
The Rollins Defendants claim that LPL and the Alliant Defendants are not "investment managers" within the meaning of 29 U.S.C.§ 1002(38) because they did not have "the power to manage, acquire, or dispose of any asset of a plan." [See Docs. 75-1 at 7 n.3; 85 at 11 n.4]. However, construing the allegations in the Amended Complaint in the light most favorable to Plaintiffs, the Court finds that Plaintiffs sufficiently plead that Defendants LPL and Alliant are "investment managers." See, e.g., Am. Compl. ¶ 254 (discussing the Alliant Defendants and LPL's involvement in designing the investment platform to "steer" funds to certain "investment options"), ¶ 306 (discussing how the Alliant Defendants and LPL would "funnel[] participants' retirement savings into overpriced investment products"); [see also Doc. 79 at 6] ("[I]mprovident advisors serviced the Plan, and charged for services that were not necessary.").
Am. Compl. ¶¶ 52-55, 330, 334-48. Therefore, the Court finds that Plaintiffs have pled sufficient facts to state a claim pursuant to 29 U.S.C. § 1104(a)(1)(D).
8. Counts V, VI, and VII: Prohibited transactions and breach of fiduciary duty by omission
In Counts V and VI, Plaintiffs allege that the Rollins Defendants engaged in prohibited transactions in violation of 29 U.S.C. §§ 1106(a) and (b) by retaining poor investment options in the Plan and engaging in excessive revenue sharing agreements that benefitted themselves and other Defendants. See Am. Compl. ¶¶ 477-82. The facts underlying these two (2) Counts, in turn, provide the basis for Count VII, in which Plaintiffs claim that the Rollins Defendants violated their fiduciary duty to bring a legal action on behalf of the Plan, as they were required to by 29 U.S.C. §§ 1132(a)(3) and 1104(a)(1)(A) to obtain recourse for these prohibited transactions. See id. ¶¶ 487-501. The Rollins Defendants argue that they engaged in no prohibited transaction because ERISA does not bar "ordinary arms' length commercial relationships between plans and necessary service providers" and because the Rollins Defendants received no benefits from the Plan's investment arrangements. [See Doc. 75-1 at 26, 28].
29 U.S.C. § 1106(a) generally prohibits fiduciaries from knowingly causing a plan to engage in transactions that provide benefits to a "party in interest." See 29 U.S.C. § 1106(a)(1)(A)-(E); Jordan v. Mich. Conf. of Teamsters Welfare Fund, 207 F.3d 854, 859 (6th Cir. 2000) ("Congress adopted [§ 1106(a)] of ERISA to prevent plans from engaging in certain types of transactions that had been used in the past to benefit other parties at the expense of the plans' participants and beneficiaries."). A "party in interest" is broadly defined and includes both fiduciaries and "person[s] providing services to such plan." See 29 U.S.C. § 1002(14)(A)-(B). Similarly, 29 U.S.C. § 1106(b) prohibits a fiduciary from "deal[ing] with the assets of the plan in his own interest" or receiving "any consideration ... from any party dealing with such plan" in a transaction involving Plan assets. See 29 U.S.C. § 1106(b)(1)-(3).
Here, Plaintiffs' allegations are sufficient to state a claim for violation of 29 U.S.C. §§ 1106(a) and (b). First, Plaintiffs allege that the Rollins Defendants, who are Plan fiduciaries, caused Plan assets to be transferred to other Defendants, who are "parties in interest," through excessive revenue sharing agreements and by retaining certain investment funds that paid dividends and other indirect compensation to those Defendants. See, e.g., Am. Compl. ¶¶ 245-50. Second, Plaintiffs allege that the Rollins Defendants engaged in these transactions for their own benefit and received consideration from the other Defendants in the form of deferring unreasonably high costs and fees to Plan participants (instead of the Rollins Defendants). See, e.g., id. ¶¶ 245-50, 481-82. Similarly, Plaintiffs sufficiently allege that the Rollins Defendants violated their fiduciary duty to act prudently and "for the exclusive purpose of providing benefits to participants ... and defraying reasonable expenses of administering the plan" by failing to bring suit in light of these alleged prohibited transactions. See 29 U.S.C. § 1104(a)(1)(A)(i)-(ii);
[see also Doc. 75-1 at 28] (the Rollins Defendants acknowledging that Count VII is a derivative claim dependent on Counts V and VI).
The Court is not persuaded by the Rollins Defendants' arguments to the contrary. Specifically, Defendants appear to invoke ERISA's exceptions to the prohibited transaction statutes set out in 29 U.S.C. § 1108 to support the proposition that they never engaged in prohibited transactions. [See Doc. 75-1 at 26-27]. The applicability of those exceptions, such as that which allows for a "party in interest" to be paid "reasonable compensation," "is a defense [that] did not have to be pleaded" by Plaintiffs and that should instead "be taken up at summary judgment[.]" See 29 U.S.C. § 1108(b)(2)(A); Henderson, 252 F. Supp. 3d at 1355-56. Because Plaintiffs sufficiently allege that the Rollins Defendants managed Plan assets in their own interest in part by providing Plan benefits to parties in interest, the Court finds that they have sufficiently pled their prohibited transaction claims. See Henderson, 252 F. Supp. 3d at 1355 (finding the plaintiff's allegations that the Plan required use of a particular investment fund and record-keeper despite unreasonably high fees disproportionate to the services rendered sufficient to support an ERISA prohibited transactions claim); Pledger, 240 F. Supp. 3d at 1320, 1335 (refusing to dismiss prohibited transaction claim that the defendants caused the Plan to invest in funds that paid fees to the defendants).
The Rollins Defendants cite two (2) cases to support the proposition that an ERISA prohibited transaction claim must involve a "party in interest" who is more extensively involved with a fiduciary than an ordinary plan service provider. [See Doc. 75-1 at 26-27] (citing Sellers v. Anthem Life Ins. Co., 316 F. Supp. 3d 25, 35 (D.D.C. 2018) and Ramos v. Banner Health, 1 F.4th 769, 787 (10th Cir. 2021)). However, the exacting standard espoused by Sellers and Ramos has yet to find favor in this Circuit (or many others), and the Court is not persuaded that it should require Plaintiffs to plead anything beyond what the clear statutory definition of a "party in interest" requires. See 29 U.S.C. § 1002(14)(B) (defining a "party in interest" to include "a person providing services to such plan"); id. § 1002(9) (defining a "person" as an "individual, partnership, joint venture, corporation, mutual company, joint-stock company, trust, estate, unincorporated organization, association, or employee organization"). Indeed, "Congress defined 'party in interest' to encompass those entities that a fiduciary might be inclined to favor at the expense of the plan's beneficiaries" and enacted § 1106(a) to "bar categorically a transaction that was likely to injure the pension plan" and prevent the abuses that occurred under the prior "arm'slength standard of conduct." See Harris Tr. & Sav.Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 242, 120 S.Ct. 2180, 147 L.Ed.2d 187 (2000); C.I.R. v. Keystone Consol. Industs., Inc., 508 U.S. 152, 160, 113 S.Ct. 2006, 124 L.Ed.2d 71 (1993); see also Herman v. S.C. Nat'l Bank, 140 F.3d 1413, 1418 (11th Cir. 1998). Here, Plaintiffs allege that the Rollins Defendants favored certain plan service providers in exchange for benefits and at the expense of the Plan and its participants. Such conduct, if proven, would fall squarely within the bounds of what Congress intended to prohibit when it enacted § 1106(a). The Rollins Defendants are also incorrect that the construction of "party in interest" that the Court adopts would prohibit all transactions between them and the Plan; ERISA sets out a number of statutory exceptions to liability for prohibited transactions that could allow for such transactions so long as they are reasonable. Compare 29 U.S.C. § 1108(b), [with Doc. 75-1 at 27].
9. Co-fiduciary liability claims
At the conclusion of Counts I-IV and VII, Plaintiffs allege that the Rollins Defendants should be held liable for the other Defendants' alleged breaches of their fiduciary duties pursuant to 29 U.S.C. § 1105(a). See Am. Compl. ¶¶ 419, 437, 450, 465, 501. That provision reads:
In addition to any liability which he may have under any other provisions of this part, a fiduciary with respect to a plan
shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan 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.
Here, Plaintiffs allege throughout their Amended Complaint that the Rollins Defendants (1) concealed breaches by other Defendants, (2) failed to abide by their fiduciary duties of prudence and loyalty which caused breaches by other Defendants, and (3) knew of breaches by other Defendants but failed to remedy them by bringing suit on behalf of the Plan. See, e.g., Am. Compl. ¶¶ 79, 187-88, 245-51, 301, 444. Therefore, the Court finds that Plaintiffs sufficiently allege a claim for cofiduciary liability. See Woods, 396 F. Supp. 2d at 1379 (finding pleading of knowledge of other fiduciaries' breaches and facts that would support knowledge of other fiduciaries' breaches sufficient to state a claim for co-fiduciary liability); see also FED. R. CIV. P. 9(b) (providing that "knowledge[] and other conditions of a person's mind may be alleged generally").
B. LPL's Motion to Dismiss [Doc. 76]
The Court next turns to LPL's motion to dismiss. [Doc. 76]. Plaintiffs bring Counts I, II, IV, V, and VI against LPL. See generally Am. Compl. LPL argues that all of Plaintiffs' claims against it are barred by ERISA's six (6)-year statute of repose because (1) it had no direct involvement with the Plan after 2012 and (2) Sean Waggoner, the individual Plaintiffs identify as acting on behalf of LPL in providing investment related-services after 2012, was only licensed as an investment advisor with LPL until October 2015 and was not otherwise LPL's agent or employee such that it may plausibly be held liable for his conduct. [See Doc. 76-1 at 8-11]. Plaintiffs claim that LPL violated various ERISA statutes through 2017 by Waggoner's conduct, LPL's purported "authorized agent." [See Doc. 80 at 14]. Otherwise, Plaintiffs argue that LPL concealed its violations such that Plaintiffs' claims against LPL qualify for the exception to ERISA's repose period. [See id. at 6, 15]. Upon review, the Court finds that Plaintiffs' claims brought against LPL are time-barred.
As discussed above, ERISA generally requires that a plaintiff file suit within six (6) years of the last act or omission constituting a breach, except in the case of fraud or concealment, in which case a plaintiff may file suit within six (6) years of discovering the breach or ERISA violation. See 29 U.S.C. § 1113. This exception "applies only to toll the running of the six-year period as to claims against those defendants alleged to have engaged in specific acts of fraud or concealment." Janese v. Scrufari, No. 09-CV-593-JTC, 2013 WL 5503953, at *4 (W.D.N.Y. Oct. 2, 2013) (collecting cases); Bleier v. Coca-Cola Co., 2006 WL 2947057 at *3 (N.D.Ga. 2006) (finding that fraudulent statements by one entity do not toll ERISA's statute of repose as to another entity). In short, ERISA's statute of repose "bars 'any suit that is brought after a specified time since the defendant acted,' without regard to
later accrual." Sec'y, U.S. Dep't of Labor v. Preston, 873 F.3d 877, 883 (11th Cir. 2017) (quoting Statute of Repose, Black's Law Dictionary (10th ed. 2014) (emphasis added)).
Plaintiffs appear to concede that LPL's direct involvement with the Plan ended in 2012. See Am. Compl. ¶ 134 (claiming that, at least after 2012, LPL was not "specifically hired" by the Rollins Defendants to "serve the [P]lan and participants"), ¶ 338 (alleging that LPL and the Alliant Defendants only served as "pass-through entities" whose "services were not necessary for the operation of the [P]lan"); [Docs. 76-1 at 3-4, 8; 80 at 1-3, 14]; see also generally Resolution Tr. Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th Cir. 1995) ("When a party fails to respond to an argument or otherwise address a claim, the Court deems such argument ... abandoned."). Instead, Plaintiffs contend that LPL's post-2012 interactions with the Plan were through its alleged "authorized agent," Waggoner, who purportedly committed various ERISA violations on behalf of (or at least under the supervision of) LPL through 2017. [See Doc. 80 at 1-3, 14-15] ("[A]t all times during the Class Period prior to 2018, Sean Waggoner, while an investment advisor for LPL, was a fiduciary of [the Plan].... At all relevant times through 2017, [the Rollins Defendants] allowed LPL's authorized agent, Sean Waggoner (collectively, 'LPL')"). However, the Court finds that Plaintiffs fail to plead facts sufficient for the Court to plausibly infer (1) that Waggoner acted on behalf of or under the supervision of LPL in his capacity as an investment advisor to the Plan, (2) that LPL otherwise plausibly had any involvement with the Plan during the repose period, or (3) that LPL engaged in fraud or concealment so as to toll ERISA's six (6)-year statute of repose.
Plaintiffs allege that Waggoner was retained to "provide investment advice to the Plan and Plan participants and to draft the Plan's Investment Policy Statement." Am. Compl. ¶ 336. In this capacity, Waggoner allegedly received improper and excessive "indirect compensation" through "revenue sharing agreements with Prudential and also through ... recommendations of funds to the Plan for inclusion in the investment fund menu" as a result of the Rollins Defendants' "lack of oversight and inappropriate delegation of compensation." Id. ¶¶ 346, 351. However, according to Plaintiffs, Waggoner was only registered as an investment advisor with LPL until October 2015. [See Doc. 80 at 1 n.1, 14]. Given that Plaintiffs only allege that Waggoner interacted with the Plan as an investment advisor, it is unclear how LPL may plausibly be held liable for Waggoner's alleged conduct related to the Plan after his investment advisor certification with LPL ended in October 2015.
Although Waggoner was registered as a broker with LPL until June 2017, this role is distinct from that of an investment advisor; investment advisors and brokers offer different services and have different responsibilities. [See Doc. 86 at 3 n.2].
In their response brief, Plaintiffs argue for the first time that, even though Waggoner was no longer an investment advisor registered with LPL, he was still an "authorized agent" of LPL until 2017, and LPL should therefore be held liable for his conduct while servicing the Plan during the repose period pursuant to the doctrine of respondeat superior. [See id. at 14-15]. However, this argument is unavailing because Plaintiffs do not plead any facts that suggest Waggoner was acting as an agent of LPL when he was retained by the Rollins Defendants to provide investment advice to the Plan after October 2015. See Am. Compl. ¶¶ 336-75; see also, e.g., Fincher v. Monroe Cnty. Bd. of Comm'rs,
No. 5:18-CV-00424-TES, 2019 WL 510448, at *6 (M.D. Ga. Feb. 8, 2019) (holding that the Court "cannot consider" claims raised for the first time in response to a motion to dismiss in determining whether a complaint states a claim for relief). Indeed, Plaintiffs do not plead any facts which, if proven, could establish an agency relationship between Waggoner and LPL or give rise to the inference that LPL may be held vicariously liable for the actions of Waggoner as a purported employee. See Whetstone Candy Co. v. Kraft Foods, Inc., 351 F.3d 1067, 1077 (11th Cir. 2003) (noting that an agency relationship requires "(1) the principal to acknowledge that the agent will act for it; (2) the agent to manifest an acceptance of the undertaking; and (3) control by the principal over the actions of the agent."); Yusko v. NCL (Bahamas), Ltd., 4 F.4th 1164, 1169 (11th Cir. 2021) (discussing the vicarious liability that can arise where an employee acts within the scope of their employment).
Instead, Plaintiffs only offer the conclusory allegation that Waggoner was an "affiliate and representative" of both LPL and the Alliant Defendants when the Rollins Defendants retained him at various times during the Class Period "to provide investment advice to the Plan[.]" Am. Compl. ¶ 336. Aside from Plaintiffs' aforementioned claim that Waggoner was a registered investment advisor with LPL through October 2015, the only other specific allegation they make connecting LPL and Waggoner is that Waggoner was registered as a broker with LPL through June 2017. See id. ¶¶ 342, 370. Even if the Court were to infer that Waggoner's status as a broker with LPL after October 2015 was related to his retention as an investment advisor for the Plan (even though Plaintiffs plead nothing of the sort), Plaintiffs still make no allegations that reference any control LPL had over Waggoner, that Waggoner was employed by LPL, or that providing investment advice to the Plan fell within the scope of any purported employment Waggoner had with LPL after October 2015. For this reason, Plaintiffs' claim that LPL breached a continuing duty it owed to the Plan throughout the repose period is unavailing. [See Doc. 80 at 14].
Further, in their response brief, Plaintiffs do not contend that Waggoner was "employed" by LPL—only that he was "registered" or "affiliated with" multiple companies at the same time, including LPL. [See Doc. 79 at 14-15].
Because Plaintiffs do not plausibly allege breaching conduct by or on behalf of LPL after December 30, 2015, six (6) years prior to filing this suit and the date ERISA's statute of repose began, their claims against LPL rest on alleged conduct prior to the repose period. See 29 U.S.C. § 1113. Therefore, Plaintiffs' claims against LPL must qualify for ERISA's exception for fraud and concealment to be timely. See id. In support of their argument that their claims qualify for this exception, Plaintiffs assert throughout their response brief that the Amended Complaint details LPL's "affirmative" and "material" misrepresentations. [See, e.g., Doc. 80 at 3-6, 14-15, 17]. However, the allegations Plaintiffs cite in support of this argument describe fraud and concealment purportedly committed by other Defendants. See, e.g., Am. Compl. ¶ 195 (discussing the "crediting rate, set by Prudential alone"), ¶ 199 ("Prudential concealed ... the actual underlying cost of the GIC"), ¶¶ 264-66 (discussing the Rollins Defendants' decision to "conceal" revenue sharing fees from Plan participants), ¶ 339 ("[The Rollins Defendants] intentionally ignored and concealed from participants"), ¶¶ 368-70 (discussing how the Rollins Defendants "misrepresented" and "intentionally concealed" information about Waggoner). And although Plaintiffs allege that LPL and
other Defendants received excessive fees for their services, nowhere in their Amended Complaint do they allege that LPL itself engaged in any fraud or concealment. Therefore, Plaintiffs' claims against LPL for conduct prior to December 30, 2015, do not qualify for the fraud and concealment exception to ERISA's six (6)-year statute of repose. See 29 U.S.C. § 1113; Griffin v. Aetna Health Inc., 2017 WL 4423419, at *5-6 (N.D. Ga. June 21, 2017) (holding that the plaintiffs claims did not qualify for the exception to ERISA's statute of repose because she failed to plead that a particular defendant "engaged in a course of conduct to hide its breaches from her" and dismissing those claims as time-barred).
In sum, Plaintiffs' claims against LPL are time-barred because they have not sufficiently alleged (1) breaching conduct by LPL or that could plausibly be attributed to LPL since the repose period began on December 30, 2015, or (2) that LPL engaged in fraud or concealment sufficient to qualify their claims for conduct occurring before December 30, 2015, pursuant to the exception to ERISA's statute of repose. Therefore, the Court grants LPL's motion to dismiss. [Doc. 76].
C. The Alliant Defendants' Motion to Dismiss [Doc. 77]
Plaintiffs bring Counts I, II, IV, V, and VI as well as claims for co-fiduciary liability against the Alliant Defendants. See generally Am. Compl. The Court first addresses the Alliant Defendants' argument regarding the statute of repose before turning to the substance of the Counts brought against them.
Similar to the Rollins Defendants, the Alliant Defendants argue (1) that the Court should consider the entire administrative record and other documents related to this case at this stage and (2) that Plaintiffs failed to exhaust their administrative remedies. [See Doc. 77-1 at 8-11]. However, for the reasons explained above, the Court rejects these two (2) contentions. See supra parts IV.A.1-2.
1. Time-barred claims
The Alliant Defendants first argue that Plaintiffs' claims based on conduct prior to December 30, 2015, are time-barred. [See Doc. 77-1 at 12]. In response, Plaintiffs contend that their claims based on the Alliant Defendants' purported breaches are timely because (1) they qualify for the concealment or fraud exception to ERISA's six (6)-year statute of repose and (2) the Alliant Defendants violated their "continuing duty" within the repose period to correct fiduciary breaches that occurred prior to the repose period. [See Doc. 81 at 13-14]. Although Plaintiffs' argument that the Alliant Defendants engaged in fraud or concealment is unavailing, the Court finds that Plaintiffs sufficiently allege that the Alliant Defendants breached their continuing duty to monitor past investment decisions.
First, the Court finds that Plaintiffs failed to allege that the Alliant Defendants engaged in fraud or concealment sufficient to qualify any claims based on pre-December 30, 2015 conduct for the exception to ERISA's six (6)-year statute of repose. Indeed, the allegations Plaintiffs cite in support of their argument that the Alliant Defendant committed fraud or concealment concern only the conduct of other Defendants.
Plaintiffs' focus in their response brief on the conduct of Waggoner is similarly insufficient in this regard. [See Doc. 81 at 13-14, 31]. Although the Alliant Defendants acknowledge that Waggoner is their "employee," Plaintiffs still do not plead facts sufficient for the Court to infer Waggoner committed any fraud or concealment, much less that the Alliant Defendants directed or controlled Waggoner in connection to any fraud or concealment. [See Doc. 77-1 at 28 n.13].
Second, Plaintiffs argue that the Alliant Defendants violated their "continuing
duty to act prudently" by failing (within the repose period) to monitor and replace investments that were chosen prior to the repose period. [See Doc. 81]. In support of their second argument, Plaintiffs cite to Tibble v. Edison International, where the Supreme Court held that an ERISA claim for failure to "monitor investments and remove imprudent ones" is timely "so long as the alleged breach of the continuing duty occurred within six years of the suit[.]" 575 U.S. at 530, 135 S.Ct. 1823. Here, Plaintiffs allege that during the repose period the Alliant Defendants breached fiduciary duties they owed to the Plan by failing to monitor imprudent investment options initially chosen before the repose period and advise the Rollins Defendants to replace them with better investments. See, e.g., Am. Compl. ¶¶ 93, 104. Although Plaintiffs' claims against the Alliant Defendants are time-barred to the extent they are based on the initial selections of allegedly imprudent investment funds prior to December 30, 2015, Plaintiffs' claims are not time-barred to the extent they are based on the Alliant Defendants' advice to select funds after December 30, 2015, and violation of their continuing fiduciary duty to advise the Rollins Defendants to remove and replace imprudent investments during the repose period. See Tibble, 575 U.S. at 530, 135 S.Ct. 1823 (holding that the Ninth Circuit erred in only considering the "initial selection of the three funds" rather than the continuing duty to "monitor investments and remove imprudent ones" as the bases for ERISA claims); Carolinas Elec. Workers Ret. Plan v. Zenith Am. Sols., Inc., 658 F. App'x 966, 972 (11th Cir. 2016) (observing that the time limitation on a claim for failure to monitor and remove imprudent investments begins "from the time the applicable facts and circumstances gave rise to a duty to monitor and alter the investments"); Henderson, 252 F. Supp. 3d at 1351-52 (refusing to dismiss breach of fiduciary duty claims for failure to properly monitor investments and remove imprudent ones where defendants retained funds with a long history of underperformance); see also Pledger, 240 F. Supp. 3d at 1328 (holding that the ERISA claims concerning the "initial selection" of a record keeper was time-barred but that claims based on actions of the record keeper after that initial selection were timely). Accordingly, accepting Plaintiffs' allegations as true, the Court finds that Plaintiffs' claims against the Alliant Defendants are not time-barred to the extent they are based on the Alliant Defendants' alleged breaches of their continuing duty of prudence and loyalty during the repose period.
2. Counts I and II: Breach of the duties of prudence and loyalty
Having found that Plaintiffs' claims against the Alliant Defendants are not entirely time-barred, the Court now turns to Counts I and II. Plaintiffs allege that the Alliant Defendants recommended selecting and retaining sub-optimal investment options to the Plan in order to boost the revenue sharing fees and other compensation they received at the expense of the Plan. See, e.g., Am. Compl. ¶¶ 116-23, 148, 306. Plaintiffs assert that the Alliant Defendants made these recommendations out of self-interest, without proper disclosures, using a "flawed process[;]" thus, Plaintiffs allege the Alliant Defendants violated their duty to prudently advise the Plan as an investment advisor and violated their duty of loyalty to the Plan. See id. ¶¶ 397, 400,
The Alliant Defendants concede that they were fiduciaries "with respect to [the] investment advice" they provided to the Rollins Defendants. [See Doc. 77-1 at 16]. Although the Alliant Defendants dispute that they were fiduciaries with respect to the actual selection of the Plan's investment options, Plaintiffs' claims in Counts I and II concern the investment advice process and related fiduciary duties—not actual control over the Plan investments. [See id. at 16-17].
429; [Doc. 81 at 22]. In support, Plaintiffs identify better performing funds with lesser fees, as well as the benefits the Alliant Defendants purportedly obtained as a result of the poor investment decisions. See, e.g., id. ¶¶ 116-23, 148, 306. Like the Rollins Defendants, the Alliant Defendants argue that Plaintiffs do not to allege any specific failure by them during the investment recommendation process, that alternative explanations justify the Alliant Defendants' decision to recommend revenue sharing and actively managed funds (which carry higher fees than other types of funds), and that none of the investment decisions they recommended were actually imprudent. [See Doc. 77-1 at 18-26].
The Court finds that Plaintiffs' well-pled factual allegations sufficiently support Counts I and II so as to survive the Alliant Defendants' motion to dismiss. First, Plaintiffs adequately allege that the Alliant Defendants violated a duty of prudence they owed to the Plan. The Alliant Defendants "attended every meeting of the Administrative Committee" and prepared detailed "Investment Reviews" for the Committee pursuant to their responsibility to advise and recommend investment strategies and funds, work for which they received a fee through 2020. [See Doc. 77-1 at 4-6]. Plaintiffs allege that a prudent fiduciary in the Alliant Defendants' position (1) would not have advised that the Plan select the allegedly poor investment options with excessive fees in the first place or (2) would have advised that the Plan replace them sooner. See, e.g., Am. Compl. ¶¶ 116-25, 148. Because the Alliant Defendants did not take either action, Plaintiffs sufficiently allege the Alliant Defendants violated their duty of prudence.
Second, Plaintiffs adequately allege that the Alliant Defendants violated their duty of loyalty. Plaintiffs claim that the Alliant Defendants did not take the aforementioned actions because they received direct and indirect benefits (beyond simply the "flat fee" they were paid for their services) from the Plan's enrollment in the purportedly deficient investment options. See, e.g., id. ¶¶ 263-66. Because Plaintiffs allege that the Alliant Defendants used a flawed investment recommendation process that was in their own best interest rather than the best interests of the Plan or its participants, Plaintiffs adequately state a claim for breach of the duty of loyalty to the Plan against the Alliant Defendants. See, e.g., id.
Although discovery might reveal evidence that justifies the Alliant Defendants' investment advice to the Plan, at this stage, the Court's duty is to accept the allegations in the Complaint as true, construe them in the light most favorable to Plaintiffs, and assess whether Plaintiffs might plausibly be entitled to relief. See Hill, 321 F.3d at 1335. As explained above, the Court finds that Plaintiffs' allegations are sufficient to state claims for breaches of the Alliant Defendants' fiduciary duties of prudence and loyalty to the Plan. See Pizarro, 2019 WL 11288656 at *9-12 (denying an ERISA defendant's motion to dismiss and finding the plaintiffs' allegations regarding underperforming funds and high management fees sufficient to suggest an "imprudent process" because plaintiffs "would likely have no access to [the defendant's] particular decision-making process at this stage of the litigation"); Pledger, 240 F. Supp. 3d at 1332 (rejecting a motion to dismiss breach of fiduciary duty of loyalty claims where the "[p]laintiffs [] alleged
not just that the percentage of fees was excessive, but that [the d]efendants [we]re liable for self-dealing and a failure to choose available, less expensive options."). At this juncture, the Court declines the Alliant Defendants' invitation to weigh their competing explanations against Plaintiffs' well-pled allegations. See Hill, 321 F.3d at 1335. Accordingly, the Court denies the Alliant Defendants' motion to dismiss Counts I and II.
3. Count IV: Violation of Plan terms
In Count IV, Plaintiffs allege that the Alliant Defendants violated 29 U.S.C. § 1104(a)(1)(D) by failing to certify that they were qualified to act as investment managers as required by Section 7.8(a) of the Plan. See Am. Compl. ¶ 457; [see also Doc. 53-1 at 40]. The Alliant Defendants argue that Plaintiffs do not plausibly allege that they have ever been "investment managers" for the Plan within the meaning of 29 U.S.C. § 1002(38), which defines an investment manager as one who is able to "manage, acquire, or dispose of any asset of a plan[.]" [See Doc. 77-1 at 29]. Thus, the Alliant Defendants contend they did not have to comply with the Plan's investment manager certification requirement. [See id.]
The Court finds that Plaintiffs offer sufficient facts at this stage to support a plausible claim that the Alliant Defendants acted as investment managers to the Plan. Throughout the Amended Complaint, Plaintiffs allege that the Alliant Defendants "steered" and "funneled" the Plan's assets to certain investment options. See, e.g., Am. Compl. ¶¶ 254, 306, 394, 397. Viewed in the light most favorable to Plaintiffs, these allegations suffice to support the idea that the Alliant Defendants had the power to "manage" Plan assets, consistent with 29 U.S.C. § 1002(38), and that they therefore violated Section 7.8(a) of the Plan by failing to provide proper investment manager certification. Accordingly, the Court denies the Alliant Defendants' motion to dismiss Count IV.
4. Counts V and VI: Prohibited transactions
In Counts V and VI, Plaintiffs allege that the Alliant Defendants engaged in prohibited transactions because they (1) violated 29 U.S.C. § 1106(a) when they transferred Plan assets to themselves when acting in their capacities both as fiduciaries and parties in interest of the Plan and (2) violated 29 U.S.C. § 1106(b) by dealing with the assets of the Plan in their own interest while they were fiduciaries for the Plan. See Am. Compl. ¶¶ 472-73, 481. The Alliant Defendants move to dismiss both Counts because they claim that (1) Plaintiffs do not identify any specific prohibited transaction in Count V; (2) they were not acting in fiduciary capacities when they received compensation as a service provider, as alleged in Count VI; and (3) both Counts are time-barred. [See Doc. 77-1 at 31-33]. For the reasons explained below, the Court rejects the Alliant Defendants' first two (2) arguments but partially accepts their third argument.
First, the Court finds that Plaintiffs sufficiently allege specific transactions between the Plan and the Alliant Defendants which were prohibited pursuant to 29 U.S.C. § 1106(a). Throughout their Amended Complaint, Plaintiffs allege that the Alliant Defendants intentionally advised the Plan to choose high-fee investment funds so that the Plan would engage in transactions that benefited the Alliant Defendants by (among other things) excessively compensating them via the revenue sharing agreement the Alliant Defendants had with the Plan. See, e.g., Am. Compl. ¶¶ 245-47, 254. Because Plaintiffs allege that the Alliant Defendants provided this advice while acting as fiduciaries and parties in interest of the Plan, they have
sufficiently stated a claim against the Alliant Defendants for violations of 29 U.S.C. § 1106(a). See Harris, 530 U.S. at 251-52, 120 S.Ct. 2180 (explaining that a party in interest who allegedly has knowledge that a transaction is unlawful may be held liable for prohibited transactions); Henderson, 252 F. Supp. 3d at 1355 (finding the plaintiffs allegations that the defendant's use of a particular investment fund and recordkeeper despite unreasonably high fees disproportionate to the services rendered sufficient to support an ERISA prohibited transactions claim); Pledger, 240 F. Supp. 3d at 1335 (refusing to dismiss prohibited transaction claim that the defendants caused the Plan to invest in funds that paid fees to the defendants).
Although the Alliant Defendants claim that Plaintiffs do not sufficiently allege that they were fiduciaries or parties in interest with respect to Count V, the Court disagrees. [See Doc. 77-1 at 31-32]. The Alliant Defendants previously conceded that they were fiduciaries with respect to the investment advice they provided. [See id. at 16]. This concession is directly implicated by Plaintiffs' prohibited transactions claim in Count V because that Count focuses on the excessive compensation and indirect benefits the Alliant Defendants allegedly received by advising the Rollins Defendants to populate the Plan with certain high-fee funds. Separately, Plaintiff plausibly alleges in Count V that the Alliant Defendants are parties in interest and may be held liable in that capacity. See 29 U.S.C. § 1002(14)(A)-(B) (defining a "party in interest" to include "any fiduciary" or "a person providing services to such plan"); id. § 1002(9) (defining a "person" as an "individual, partnership, joint venture, corporation, mutual company, joint-stock company, trust, estate, unincorporated organization, association, or employee organization").
Second, Plaintiffs adequately allege that the Alliant Defendants were acting as Plan fiduciaries when engaging in the purported conduct that forms the basis of Count VI. As relevant here, fiduciary status is not an "all or nothing proposition." See Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1277 (11th Cir. 2005). Instead, the actions complained of must have been undertaken while the defendant was acting in a fiduciary role, which generally requires any discretionary control or authority over the assets, management, or administration of a plan. See Mertens v. Hewitt Assoc., 508 U.S. 248, 262, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993); 29 U.S.C. § 1002(21)(A). Merely negotiating and receiving compensation does not turn a service provider into a fiduciary. Pizarro, 2019 WL 11288656, at *6. However, Plaintiffs claim that the Alliant Defendants "retained fees that were earmarked for participants," "manipulate[d] and increase[d] their compensation at the expense of participants," received "rebates of Plan expenses ... as well as portions of participant contributions" and "significant indirect compensation" (independent of their negotiated revenue sharing fees) as a result of the investment options the Alliant Defendants recommended for the Plan, in violation of 29 U.S.C. § 1106(b). [See Doc. 81 at 34]; Am. Compl. ¶¶ 346, 481-82. Therefore, construing the Amended Complaint's allegations most favorably to Plaintiffs, the Court can plausibly infer that the Alliant Defendants were acting as Plan fiduciaries when they exercised some control or authority over the excessive compensation they received from the Plan's assets beyond their contractually negotiated fee and did so in their own interests, thereby potentially violating 29 U.S.C. § 1106(b).
Though the Court finds that Plaintiffs adequately state claims against the Alliant Defendants for violations of 29 U.S.C. § 1106(a) and 29 U.S.C. § 1106(b), the Court agrees with the Alliant Defendants that these claims are time-barred to the extent that they challenge allegedly prohibited transactions that occurred prior to
December 30, 2015, the beginning of the repose period. [See Doc. 77-1 at 34]. It is well-established that only the original initiation of a prohibited transaction—not any subsequent omission or failure to correct the transaction—gives rise to a cause of action pursuant to 29 U.S.C. § 1106(a) or (b). See David v. Alphin, 704 F.3d 327, 340 (4th Cir. 2013) (collecting cases). And, as discussed above, Plaintiffs fail to allege that the Alliant Defendants engaged in fraud or concealment sufficient to toll ERISA's repose period. See supra part IV.C.1. Therefore, the Court grants the Alliant Defendants' motion to dismiss Counts V and VI to the extent that these claims are premised on any unlawful transactions initiated prior to December 30, 2015, but denies it to the extent that Plaintiffs' claims include prohibited transactions during the repose period. See David, 704 F.3d at 340-41 (finding prohibited transaction claims time-barred to the extent that the original transaction occurred prior to the repose period and rejecting argument that each "failure to remove the affiliated funds at every committee meeting constituted new 'prohibited transactions'").
5. Co-Fiduciary Liability
Finally, at the end of Counts I, II, and IV, Plaintiffs assert a claim for cofiduciary liability pursuant to 29 U.S.C. § 1105(a). Specifically, Plaintiffs allege that (1) the Alliant Defendants' breach of their fiduciary duties aided other fiduciaries' breaches and (2) that the Alliant Defendants knew or should have known of other fiduciaries' breaches. See, e.g., Am. Compl. ¶¶ 142, 160, 208, 235, 246. The Court finds that Plaintiffs sufficiently state their claims for co-fiduciary liability against the Alliant Defendants at this procedural juncture. See Woods, 396 F. Supp. 2d at 1379 (finding allegations of knowledge of other fiduciaries' breaches and facts that would support knowledge of other fiduciaries' breaches sufficient to state a claim for cofiduciary liability).
D. The Prudential Defendants' Motion to Dismiss [Doc. 78-1]
Plaintiffs bring Counts I, II, V, and VI against the Prudential Defendants. See generally Am. Compl. The Court first addresses the Prudential Defendants' general argument regarding the timeliness of Plaintiffs' claims against them before turning to the individual Counts.
1. Time-barred claims
As an initial matter, the Court finds Plaintiffs sufficiently allege that the Prudential Defendants concealed the revenue sharing agreements, fees, and other compensation they received from the Plan and its participants. See Am. Compl. ¶ 42 (discussing "Prudential's and [the Rollins Defendants'] intentional concealment of illicit kickbacks") ¶ 199 ("Prudential concealed ... the actual underlying cost of the GIC"). And because Plaintiffs allege that they did not become aware of these ERISA violations until 2019 due to this concealment, their claims against the Prudential Defendants are timely. See id. ¶ 79; Dist. 65 Ret. Trust, 925 F. Supp. at 1561 (holding that the ERISA statute of repose did not accrue until the "plaintiff discovered the breach or violation" and the plaintiffs' allegations of concealment by the defendant were sufficient at the motion to dismiss stage).
2. Counts I and II: Breach of the duties of prudence and loyalty
Having determined Plaintiffs' claims against the Prudential Defendants are not time-barred, the Court now turns to the Parties' arguments. In Counts I and II, Plaintiffs allege that the Prudential Defendants violated their fiduciary duties of prudence and loyalty. See generally Am. Compl. The Prudential Defendants challenge these Counts on the bases that (1) PRIAC is not a fiduciary with regard to the conduct Plaintiffs challenge and (2) PB
& T only had a limited fiduciary role as a directed trustee with the Plan and therefore cannot be held liable for the purportedly discretionary conduct alleged in the Complaint. [See Doc. 78-1 at 11-20]. The Court addresses these arguments in turn.
a. PRIAC's fiduciary status
As relevant here, ERISA provides that
a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.
29 U.S.C. § 1002(21)(A). However, as noted, fiduciary status is not an "all or nothing proposition." Cotton, 402 F.3d at 1277. Instead, the "threshold question" in determining whether a defendant was acting as a fiduciary is whether the defendant was "performing a fiduciary function when taking the action subject to complaint." Pegram v. Herdrich, 530 U.S. 211, 225-26, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000).
Plaintiffs allege that PRIAC was a fiduciary with respect to two (2) actions: (1) exercising control over Plan assets, including the GIC and the surplus from revenue sharing fees and (2) exercising discretion over the administration and management of the Plan through its influence over the Rollins Defendants. [See Doc. 82 at 15-23]. In their motion, the Prudential Defendants argue that PRIAC was not a fiduciary to the extent alleged by Plaintiffs because it was merely the Plan's recordkeeper, received only contractually specified compensation set by a formula, and that it at most "influenced" the Rollins Defendants but did not control any decisions regarding which investment options were included in the Plan. [See Doc. 78-1 at 11-18].
First, the Court finds that Plaintiffs allege sufficient facts that PRIAC was a fiduciary when it exercised some control over Plan assets. Specifically, Plaintiffs allege that PRIAC set the crediting rate in the GIC, which affected its value and allowed PRIAC to impermissibly retain revenue fee surpluses. See, e.g., Am. Compl. ¶¶ 93, 177, 178, 195, 237, 254-59, 264, 396, 481-82. The Parties do not dispute that the GIC is a Plan asset. [See generally Docs. 78-1, 82, 84]. And though the revenue sharing funds themselves are not Plan assets, courts have used a functional approach that assesses "whether the item in question may be used to the benefit (financial or otherwise) of the fiduciary at the expense of plan participants or beneficiaries" to hold that a plan's contractual right to collect unpaid funds is an asset. Acosta v. Pac. Enter., 950 F.2d 611, 620 (9th Cir. 1991) (describing the need for a functional approach to determining plan assets broadly given Congress' "overriding concern with the protection of plan participants and beneficiaries"); accord In re Luna, 406 F.3d 1192, 1199-1202 (10th Cir. 2005) (unpaid contributions owed by the employer to the plan were plan assets because the plan held a future interest in them); Haddock v. Nationwide Fin. Servs., Inc., 419 F. Supp. 2d 156, 170 (D. Conn. 2006) (finding revenue-sharing payments to be plan assets).
Here, Plaintiffs allege that PRIAC received excess revenue sharing funds owed to Plan participants as a result of its fiduciary status, and thus, PRIAC benefitted at the expense of the Plan. See, e.g., Am. Compl. ¶¶ 255-58. And because Plaintiffs claim that PRIAC set the GIC crediting
rate at its "sole discretion" and impermissibly retained revenue sharing fee amounts that should have been timely credited back to Plan participants, PRIAC plausibly exercised at least some control over Plan assets such that it qualifies as a fiduciary of the Plan in that regard. See, e.g., Am. Compl. ¶¶ 177, 195, 255-59; see also 29 U.S.C. § 1002(21)(A) (providing that a person is a fiduciary of a plan to the extent that they "exercise[] any authority or control respecting management or disposition of [the plan's] assets") (emphasis added).
Defendants contend that merely setting the crediting rate by the formula prescribed in a contract and collecting contractually specified revenue sharing compensation does not transform a service provider into a fiduciary. [See Docs. 78-1 at 14-17; Doc. 84 at 4-12]. Although Plaintiffs allege that the crediting rate is set by a formula in the Plan's contract with PRIAC, they also allege throughout the Amended Complaint that PRIAC had the "sole discretion" to set the crediting rate and impermissibly retained revenue sharing fees to which it was not entitled. See, e.g., Am. Compl. ¶¶ 177, 195, 255-59. The Court finds these allegations sufficient at this stage to support the claim that PRIAC exercised "any control over the management or disposition of" the crediting rate in the GIC and the surplus revenue sharing funds. The Parties' dispute over the factual machinations and functioning of the credit rating formula and PRIAC's alleged manipulation of that formula are best left for resolution at summary judgment or trial.
In their reply brief, the Prudential Defendants argue that the Court should consider whether they are fiduciaries of the Plan using a test adopted by the Eighth and Tenth Circuits. [See Doc. 84 at 4-5] (citing Teets v. Great-West Life & Annuity Ins. Co., 921 F.3d 1200, 1212 (10th Cir. 2019) and Rozo v. Principal Life Ins. Co., 949 F.3d 1071, 1073-74 (8th Cir. 2020)). Pursuant to this test, a court determines whether a service provider to a plan is a fiduciary of that plan by considering (1) if the service provider conformed to a specific term of its contract and (2) if the plan or its participants had an "unimpeded ability to reject the service provider's action or terminate the relationship with the service provider." See Teets, 921 F.3d at 1212; see also Rozo, 949 F.3d at 1073-74 (noting that the parties in that case agreed to use the test set out first in Teets). Although the Court does not explicitly adopt the Teets test, which is relatively new and appears to have been applied only at the summary judgment stage, it notes that Plaintiffs likely satisfy the Teets test at this stage by pleading that PRIAC operated beyond its contractual authority with regard to the crediting rate in the GIC and the revenue sharing fee surplus and that Plan participants faced hurdles in attempting to opt out of GoalMaker or change the default investment portfolio. See, e.g., Am. Compl. ¶¶ 95, 295.
Though the Court finds that PRIAC was a fiduciary with respect to the GIC and surplus revenue sharing fees, the Court reaches the opposite conclusion with respect to PRIAC's alleged conduct "exert[ing] influence" over the Rollins Defendants' investment decisions. [See Doc. 82 at 21]. Although Plaintiffs claim in their response brief that PRIAC "exercised discretion" and was "empowered" to make "unilateral changes" to Plan investment options, the Court finds no factual allegations in the Amended Complaint that support this argument. [See id. at 6, 23]. Instead, the Amended Complaint repeatedly alleges that the Rollins Defendants were the entities who made investment decisions on behalf of the Plan. See, e.g., Am. Compl. ¶¶ 47, 49. Even if the Court were to accept Plaintiffs' broad contention that PRIAC generally influenced the Rollins Defendants, the cases cited by Plaintiffs do not support a finding of fiduciary status based solely on such a limited role. See Stanton v. Shearson Lehman/Am. Ex., 631 F. Supp. 100, 103-04 (N.D. Ga. 1986) (finding a genuine issue of material fact regarding
a stock broker's fiduciary status where the plaintiffs alleged that the plan "was dependent" on the broker's "special expertise" and "blindly followed" the broker's recommendations rather than exercise independent judgment); Tussey v. ABB, Inc., 2008 WL 379666, at *6-7 (W.D. Mo. Feb. 11, 2008) (declining to find that a defendant was not a fiduciary where the plaintiffs alleged that the defendant directly managed funds, reviewed all investment options before they were selected, and had veto authority over investment options); Haddock, 419 F. Supp. 2d at 166 (finding that a reasonable jury could conclude that the defendant was a fiduciary where it controlled and altered "which mutual funds are available for the [p]lans' and participants' investments"); Leimkuehler v. Am. United Life Ins. Co., 713 F.3d 905, 911 (7th Cir. 2013) (finding that the mere act of presenting an investment product to a retirement plan is not enough to transform a service provider into an ERISA fiduciary). The Amended Complaint does not allege facts similar to these cases regarding PRIAC's involvement in the Rollins Defendants' process of choosing investments for the Plan. Instead, it appears that PRIAC merely offered mutually beneficial investment packages, which the Rollins Defendants selected. See, e.g., Am. Compl. ¶¶ 253, 263, 269.
Likewise, the Court finds that Plaintiffs' assertion in their response brief that PRIAC "required" and "pressured" the Rollins Defendants to retain certain investment funds despite the funds' poor performance is unsupported by the allegations in the Amended Complaint. [See Doc. 82 at 7-8]. To the contrary, Plaintiffs allege that the Rollins Defendants decided to choose and retain the purportedly imprudent investment options in the Plan offered by PRIAC both because of a faulty process set up by the Rollins Defendants and because the Rollins Defendants (and other Defendants) personally benefitted from the selection of those options. See, e.g., Am. Compl. ¶¶ 93, 400. Indeed, not only does the Amended Complaint not allege any facts suggesting that PRIAC had controlling influence over the Rollins Defendants, it suggests no influence was necessary because the Rollins Defendants willingly populated the Plan with certain investment options that paid purportedly excessive revenue sharing fees to PRIAC and other Defendants out of the Plan participants' returns and continued to do so to avoid exposure. See, e.g., id. ¶¶ 235, 245-50.
For the foregoing reasons, the Court grants in part and denies in part the Prudential Defendants' motion to dismiss Counts I and II as to Defendant PRIAC. Plaintiffs' breach of fiduciary duty claims in Counts I and II may proceed against PRIAC to the extent that they involve PRIAC's conduct with respect to the GIC crediting rate and the surplus revenue fees, but these claims may not proceed based on the Rollins Defendants' ultimate decisions to invest in certain funds.
b. PB & T directed trustee liability
The Prudential Defendants next assert that PB & T, as a directed trustee, did not plausibly breach any fiduciary duties when it followed the instructions of the Rollins Defendants to invest in certain funds because it did not have actual knowledge of any ERISA violation. [See Doc. 78-1 at 20]. A directed trustee is one who acts only at "the direction of a named fiduciary ... which are made in accordance with the terms of the plan and which are not contrary to" ERISA. See 29 U.S.C. 1103(a)(1). Courts have regularly
It is undisputed that PB & T was a directed trustee of the Plan. See Am. Compl. ¶ 29; [Doc. 78-1 at 2].
held that directed trustees are ERISA fiduciaries. See In re WorldCom, Inc. ERISA Litig., 354 F. Supp. 2d 423, 444 (S.D.N.Y. 2005) (collecting cases); In re Sprint Corp. ERISA Litig., 388 F. Supp. 2d 1207, 1236 (D. Kan. 2004). As a fiduciary, "[a] directed trustee must discharge its own duties in conformity with the prudent man standard of care[] and avoid prohibited transactions." In re Worldcom, Inc., 354 F. Supp. 2d at 445. A directed trustee's fiduciary duty includes an obligation to refuse to "comply with a direction from a named fiduciary that it knows or ought to know is violating that fiduciary's obligations to plan beneficiaries." Id.
Here, construing the allegations in the light most favorable to Plaintiffs, the Court finds that Plaintiffs plausibly allege that PB & T, in its role as a directed trustee of the Plan, knew or should have known that the instructions it received from the Rollins Defendants to invest in underperforming funds—in which the Prudential Defendants had an interest and from which they received excessive benefits—was imprudent, breached fiduciary duties, and violated ERISA. See, e.g., Am. Compl. ¶ 75 (discussing how PB & T "secretly profited" from PRIAC's scheme), ¶ 104 (the only funds retained in GoalMaker were those which paid fees to the Prudential Defendants), ¶ 188 (the Prudential Defendants received unmonitored windfalls), ¶ 419 (Defendants knew of each other's breaches), ¶ 427 (PB & T heeded the Rollins Defendants directions to pay "unreasonable and unnecessary fees and expenses"), ¶ 431 ("unreasonable and excessive fees charged to" Plan participants' accounts in part as a result of PB & T's revenue sharing agreement with the Rollins Defendants). These allegations are sufficient to give rise to the inference that PB & T knew, or that a prudent trustee should have known, that investments chosen by the Rollins Defendants were imprudent and that the selection and retention of these investments constituted breaches of fiduciary duties. See Wright v. Or. Metallurgical Corp., 360 F.3d 1090, 1103 (9th Cir. 2004) (upholding dismissal of claims against directed fiduciary where underlying fiduciary directions were dismissed). Indeed, that these investments benefitted the Prudential Defendants and the Rollins Defendants over the Plan's participants should have put PB & T on notice that the investments were imprudent. See In re WorldCom, Inc., 263 F. Supp. 2d 745, 762 (S.D.N.Y. 2003) (denying motion to dismiss in part and holding that the directed trustee could be liable as a fiduciary where the complaint alleged that a prudent trustee would have known that Worldcom's decision to offer its own stock to its employees as an investment option was imprudent); In re Sprint Corp., 388 F. Supp. 2d at 1236 (denying motion to dismiss where the plaintiffs alleged that the directed trustee continued to invest in Sprint's own stock which it knew or should have known was "plummeting"). Accordingly, the Court denies the Prudential Defendants' motion to dismiss Counts I and II as alleged against Defendant PB & T.
3. Counts V and VI: Prohibited transactions
In Counts V and VI, Plaintiffs allege that the Prudential Defendants (1) transferred Plan assets to themselves as both a fiduciary and a party in interest in violation of 29 U.S.C. § 1106(a) and (2) dealt with the assets of the Plan as a fiduciary in their own interest in violation of 29 U.S.C. § 1106(b). See Am. Compl. ¶¶ 472-73, 481. Defendants argue that (1) as fiduciaries, they did not "cause" the Plan to engage in any prohibited transactions as required by 29 U.S.C. § 1106(a) and (2) they are not fiduciaries with respect to the Plan assets they are alleged to have received pursuant to 29 U.S.C. § 1106(b). [See Doc. 78-1 at
22-24]. The Court finds both arguments unpersuasive.
First, either a fiduciary or a party in interest who receives a prohibited transaction and had actual or constructive knowledge that the transaction was unlawful can violate 29 U.S.C. § 1106(a). See Harris, 530 U.S. at 251-52, 120 S.Ct. 2180. A party in interest is defined broadly and includes fiduciaries and "person(s) providing services" to the Plan. See 29 U.S.C. §§ 1002(14)(A)-(B). Because the Court can infer at this stage that the Prudential Defendants (1) were at minimum parties in interest as either fiduciaries or service providers and (2) had knowledge of the allegedly prohibited transactions conveying excessive direct and indirect compensation from the Plan to themselves, the Court finds that Plaintiffs sufficiently stated their claim against the Prudential Defendants pursuant to 29 U.S.C. § 1106(a) in Count V. See, e.g., Am. Compl. ¶¶ 75, 104, 188, 419, 427, 431.
Because the Court finds that the Prudential Defendants received Plan assets as parties in interest, it is not necessary for the Court to consider Plaintiffs' alternate theory that the Prudential Defendants violated 29 U.S.C. § 1106(a) as fiduciaries who "caused" the Plan to enter into a prohibited transaction.
Second, the Court finds that Plaintiffs sufficiently allege that the Prudential Defendants were both fiduciaries with respect to the revenue fee surpluses which they allegedly retained in their own interest in violation of 29 U.S.C. § 1106(b). As directed trustee, PB & T was a fiduciary with an obligation to act prudently by rejecting directions, contrary to the Plan or ERISA. In following the Rollins Defendants' directions to invest Plan assets in funds that paid excessive revenue sharing fees to the Prudential Defendants, from which the Prudential Defendants allegedly retained surpluses, Plaintiffs plausibly allege that PB & T dealt with the assets of the Plan as a fiduciary and in its own interest. And, as discussed above, Plaintiffs plausibly allege that PRIAC is a fiduciary with respect to these revenue fee surpluses. Therefore, the Court finds that Plaintiffs adequately allege that the Prudential Defendants dealt with Plan assets as fiduciaries in their own interest in violation of 29 U.S.C. § 1106(b). Accordingly, the Court denies the Prudential Defendants' motion to dismiss Counts V and VI.
4. Co-fiduciary liability claims
Finally, at the end of Counts I and II, Plaintiffs assert a claim for cofiduciary liability pursuant to 29 U.S.C. § 1105(a). Here, Plaintiffs allege facts to support that (1) the Prudential Defendants' breach of their fiduciary duties aided other fiduciaries' breaches and (2) the Prudential Defendants knew or should have known of other fiduciaries' breaches. See, e.g., Am. Compl. ¶¶ 75, 188, 208, 246, 419, 431. Accordingly, Plaintiffs sufficiently state a claim for co-fiduciary liability against the Prudential Defendants at this stage, and the Court denies the Prudential Defendants' motion to dismiss the same. See Woods, 396 F. Supp. 2d at 1379 (finding pleading of knowledge of other fiduciaries' breaches and facts that would support knowledge of other fiduciaries' breaches sufficient to state a claim for co-fiduciary liability).
V. Conclusion
For the foregoing reasons, the Court DENIES the Rollins Defendants' "Motion to Dismiss the First Amended Complaint." [Doc. 75]. The Court GRANTS LPL's "Motion to Dismiss Plaintiffs' First Amended Complaint." [Doc. 76]. Accordingly, the Court DIRECTS the Clerk to terminate LPL Financial LLC as a Party Defendant to this case. Additionally, the Court GRANTS IN PART AND DENIES IN PART the Alliant Defendants' "Motion to Dismiss the First Amended Complaint." [Doc. 77]. Specifically, the Court GRANTS the Alliant Defendants' motion to the extent that Plaintiffs' claims against the Alliant Defendants are based on conduct prior to the beginning of the ERISA repose period on December 30, 2015, and DENIES that motion in all other respects. Finally, the Court GRANTS IN PART AND DENIES IN PART the Prudential Defendants' "Motion to Dismiss the First Amended Class Action Complaint." [Doc. 78]. Specifically, the Court GRANTS the motion to the extent that Plaintiffs' claims in Counts I and II concern influence PRIAC allegedly exerted over the Rollins Defendants' ultimate investment decisions but DENIES that motion in all other respects.
The Court DIRECTS the Rollins Defendants, the Alliant Defendants, and the Prudential Defendants to, within fourteen (14) days of the date of this order, answer Plaintiffs' Amended Complaint. See FED. R. CIV. P. 12(a)(4)(A). Further, the Court DIRECTS the remaining Parties to, within thirty (30) days of the entry of this order, confer and submit a Joint Preliminary Report and Discovery Plan in accordance with the Local Rules of this district and to serve their initial disclosures pursuant to Federal Rule of Civil Procedure 26(a)(1). See LR 16.2, NDGa.; FED. R. CIV. P. 26.
SO ORDERED, this 30th day of January, 2023.