Clive Cooper, Individually And, Inc. v. Ruane Cunniff & Goldfarb Inc.
| Decision Date | 15 August 2017 |
| Docket Number | 16cvl900 |
| Parties | CLIVE COOPER, individually and as a representative of a class of similarly situated plan participants, on behalf of the DST SYSTEMS, INC. 401(K) PROFIT SHARING PLAN, Plaintiff, v. RUANE CUNNIFF & GOLDFARB INC., Defendant. |
| Court | U.S. District Court — Southern District of New York |
Ruane Cunniff & Goldfarb Inc. ("Ruane") moves to compel Clive Cooper ("Cooper") to arbitrate his claims, or in the alternative, dismiss Count Three of the Complaint. For the reasons that follow, Ruane's motion to compel arbitration is granted.
This ERISA action arises from the alleged mismanagement of assets in the DST Systems, Inc. 401(k) Profit Sharing Plan (the "Plan"). Cooper, individually and as representative of similarly situated Plan participants, brings claims on behalf of the Plan, alleging principally that the Plan's fiduciaries pursued an imprudent investment strategy that resulted in losses exceeding $100 million. (Complaint ("Compl."), ECF No. 1, ¶ 5.) Cooper further alleges that Plan fiduciaries deprived participants of timely and meaningful information regarding their investments, including investment objectives, strategies, portfolio holdings, and the risk levels associated with each investment. (Compl., ¶¶ 31-33.) Moreover, Cooper claims that conflicts of interest between Ruane—the Plan's investment manager—and DST hobbled management of the Plan, and allowed Ruane to enter into self-dealing transactions, charge unreasonable fees, and continue as investment manager despite years of dismal performance. (See Compl., ¶¶ 43-52.)
In 1999, Cooper began working at DST as a software development manager. His career there spanned more than 16 years until his retirement in January 2016. (Def. Motion to Compel Arbitration ("Def. Mot."), Ex. SS, ECF No. 65-45, Cooper Tr. 27:6-15.) As part of his employment, Cooper joined the Plan. (Cooper Tr. 30:16-18.) The Plan consisted of two components: (1) a participant-directed 401(k) plan in which employee contributions were matched by DST up to a certain percentage; and (2) a profit sharing account (the "PSA") in which DST made 100% of the contributions on behalf of its employees based on a percentage of their eligible wages each year. (Compl., ¶ 27; Cooper Tr. 34:2-15, 36:8-13; Def. Mot., Ex. TT, ECF No. 65-46, Young Tr. 137:6-9, 137:10-14.)
Notably, participants could not opt out of the PSA—they were automatically enrolled by virtue of their employment. (Cooper Tr. 34:17-20; Young Tr. 137:24-138:1.) Moreover, participants could not transfer assets out of the PSA unless they ended their employment with DST. (Def. Mot., Ex. B, ECF No. 65-2, Summary Plan Description of the DST Plan Effective January 1, 2000 ("2000 DST SPD"), at 12-13.) Ruane, as the investment manager selected by DST's Advisory Committee, managed all PSA assets. (2000 DST SPD at 10.)
Ruane had a longstanding, symbiotic relationship with DST that " '[went] back decades-to the 1980s.'" (Compl., ¶¶ 35, 50.) As early as 1973, DST's Advisory Committee retained Ruane as the exclusive manager of PSA assets. (See, e.g., Def. Mot., Ex. E, ECF No.65-5, 2011 Profit Sharing Contribution Notice to DST Plan Participants ("Profit Sharing Contribution Notice"); Young Tr. 213:14-19; Cooper Tr. 128:4-6.) The Advisory Committee, a fiduciary under ERISA, was responsible for monitoring Ruane's performance. (Young Tr. 199:9-12.) Separately, DST's Compensation Committee, also a fiduciary of the Plan, supervised the Advisory Committee. (Young Tr. 199:9-12; Compl., ¶ 14.) As part of its oversight duties, the Advisory Committee reviewed periodic reports provided by Ruane. (Young Tr. 198:12-18.) Several times a year, Ruane discussed investment strategies and individual stocks in the PSA with the Advisory Committee. (Young Tr. 203:3-8.) DST retained authority over Ruane—it could, at any time, modify the investment guidelines to which Ruane was subject or terminate Ruane by written notice. (Compl., ¶ 22; Def. Mot., Ex. KK, ECF No. 65-37, Investment Management Agreement dated February 12, 1998, at 2.)
Cooper's relationship with Ruane stems largely from notices and communications he received as a Plan participant over the course of his employment. Those documents identified Ruane as the exclusive manager of PSA assets. Various iterations of the Summary Plan Descriptions explain that all "Profit Sharing Contributions made by [DST] to the Plan on [Cooper's] behalf will be invested by the Trustee as advised by Ruane . . . the investment advisor selected by the [DST] Advisory Committee to manage these funds." (Def. Mot., Ex. I, 2008 DST SPD, at 10; Exs. J-L, 2011-13 DST SPD, at 11.) Cooper received annual notices about DST's contributions on behalf of Plan participants, which reported Ruane's latest performance. (Def. Mot., Exs. E-H, 2011-14 Sharing Contribution Notices.) Account statements updated Cooper on individual stocks selected by Ruane and disclosed the investment management fee that Ruane received every quarter for managing Cooper's account. (See Def. Mot. Ex. M, Account Statement dated Jan. 1, 2013-Sept. 30, 2013, at 1; Ex. N, Account Statement dated Jan.1, 2015-Dec. 31, 2015, at 4 ().) As a participant in the Plan, Cooper appears to have taken an active interest in monitoring the PSA, taking notes on his statements about the performance of its assets and analyzing them to determine how much DST contributed on his behalf every year. (Cooper Tr. 76:14-77:22, 77:17-25.)
In 2012, Ruane came into sharper focus when DST advised employees that it would no longer pay Ruane's management fees for them. (Def. Mot., Ex. JJ, DST Plan Important Notice of Investment Management Fee Change dated Dec. 3, 2012.) Effective January 1, 2013, Plan participants, including Cooper, began paying their pro rata share of Ruane's fees, which were deducted from each employee's PSA. (Cooper Tr. at 87:11-23, Young Tr. at 180:4.)
As a DST employee, Cooper received a copy of the "Associate Handbook," a manual memorializing a number of employment-related policies, benefits, standards of conduct, and programs. (Def. Mot., Ex. C, Associate Handbook, at 1.) The Associate Handbook contained a section on arbitration which stated, in relevant part:
For employment-related legal disputes that are not resolved through our Open Door Policy or Equal Employment Opportunity (EEO) Policy, the Company has implemented an arbitration program under the DST Output Arbitration Program and Agreement that is set forth in the Addendum to this Handbook.
(Associate Handbook at 5.) The Arbitration Program and Agreement (the "Arbitration Agreement") covered "all legal claims arising out of or relating to employment, application for employment, or termination of employment, except for claims specifically excluded under the terms" of the agreement. (Associate Handbook at A-4.) Four discrete categories of claims werecarved out from arbitration: (1) workers' compensation benefits, (2) unemployment compensation benefits, (3) ERISA-related benefits provided under a Company sponsored benefit plan, and (4) claims filed with the National Labor Relations Board. (Associate Handbook at A- 4.) While DST strongly encouraged employees to resolve employment disputes through arbitration, it allowed them to opt out of the arbitration program within 30 days of receipt of the Arbitration Agreement. (Associate Handbook at A-5.)
On August 11, 2008, Cooper signed the Acknowledgement and Agreement Form, indicating that he understood and agreed that if he did not "opt out in writing within 30 days after [he] receive[d] the [Arbitration Agreement], then [he] and [DST] shall be considered to have agreed" to the arbitration program "as a binding contract to waive the right to judge or jury trial and to resolve employment-related legal claims under the terms" of the Arbitration Agreement. (Def. Mot., Ex. D, Acknowledgment and Agreement Form DST Output Arbitration Program and Agreement with Associate Opt Out Right; see also Cooper Tr. 134:17-23.) Cooper did not opt out of the Arbitration Agreement. (Cooper Tr. 134:20-23.)
In March 2016, Cooper filed this lawsuit. Several months later, he voluntarily dismissed his claims against all Defendants in this action except Ruane. (See Notice of Partial Dismissal Pursuant to Fed. R. Civ. P. 41(a)(1)(A), ECF No. 41.) Cooper chose to mediate his claims with the DST Defendants in a private forum. (Plaintiff's Opposition to Motion to Compel Arbitration ("Pl. Opp."), ECF No. 70, at 29.) While Cooper dismissed DST, he did not amend his Complaint.
"In the context of motions to compel arbitration brought under the Federal Arbitration Act . . . the court applies a standard similar to that applicable for a motion for summary judgment." Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003) (internal citations omitted). "A motion to compel arbitration must be dismissed and a trial held if there is an issue of fact as to the making of the agreement for arbitration." Brown v. St. Paul Travelers Co., Inc., 331 Fed. App'x 68, 69 (2d Cir. 2009). In making that determination, this Court must consider the pleadings, discovery materials, and affidavits showing whether there is a genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Ryan v. JPMorgan Chase & Co., 2013 WL 646388, at *2 (S.D.N.Y. Feb. 21, 2013).
The central issue raised in Ruane's motion is whether Cooper's breach of fiduciary duty claims relating to the mismanagement of assets in the Plan fall within the ambit of DST's broadly worded...
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