David v. Alphin
| Decision Date | 14 January 2013 |
| Docket Number | No. 11–2181.,11–2181. |
| Parties | Elena M. DAVID; Arleen J. Stach; Victor M. Hernandez, Plaintiffs–Appellants, v. J. Steele ALPHIN; Amy Woods Brinkley; Edward J. Brown, III; Charles J. Cooley; Richard M. Demartini; Barbara J. Desoer; James H. Hance, Jr.; Liam E. McGee; Eugene M. McQuade; Alvaro G. De Molina; Michael E. O'Neill; Owen G. Shell, Jr.; R. Eugene Taylor; F. William Vandiver, Jr.; Bradford H. Warner; Kenneth D. Lewis; Bank of America Corporation; Bank of America Corporation Corporate Benefits Committee; J. Tim Arnoult; Catherine P. Bessant; Timothy Mayapoulous; Brian T. Moynihan, Defendants–Appellees, and William Barnet, III; Walter E. Massey; John T. Collins; Gary L. Countryman; Paul Fulton; Charles K. Gifford; Thomas J. May; Patricia E. Mitchell; Edward L. Romero; Thomas M. Ryan; O. Temple Sloan, Jr.; Meredith R. Spangler; Robert L. Tillman; Jackie M. Ward; Bank of America Corporation Board of Directors; Frank P. Bramble, Sr.; Tommy R. Franks, Defendants. AARP; Pension Benefit Guaranty Corporation; Hilda L. Solis, Secretary of Labor, Amici Supporting Appellants. |
| Court | U.S. Court of Appeals — Fourth Circuit |
OPINION TEXT STARTS HERE
ARGUED:Gregory Y. Porter, Bailey & Glasser LLP, Washington, D.C., for Appellants. Robert Leonard Furst, United States Department of Labor, Washington, D.C., for Amici Supporting Appellants. Shannon Barrett, O'Melveny & Myers, LLP, Washington, D.C., for Appellees. ON BRIEF:James A. Moore, McTigue & Veis LLP, Washington, D.C.; Benjamin L. Bailey, Sherrie A. Armstrong, Bailey & Glasser LLP, Washington, D.C., for Appellants. Deanna M. Rice, O'Melveny & Myers, LLP, Washington, D.C., for Appellees. Mary Ellen Signorille, Jay E. Sushelsky, AARP Foundation Litigation, Melvin R. Radowitz, AARP, Washington, D.C., for Amicus Curiae AARP. Israel Goldowitz, Chief Counsel, Charles L. Finke, Deputy Chief Counsel, Paula J. Connelly, Assistant Chief Counsel, Pension Benefit Guaranty Corporation, Washington, D.C., for Amicus Curiae Pension Benefit Guaranty Corporation. M. Patricia Smith, Solicitor of Labor, Timothy D. Hauser, Associate Solicitor, Plan Benefits Security, Nathaniel I. Spiller, Counsel for Appellate and Special Litigation, Stephen A. Silverman, Trial Attorney, United States Department of Labor, Washington, D.C., for Amicus Curiae Secretary of Labor.
Before NIEMEYER, SHEDD, and DAVIS, Circuit Judges.
Affirmed by published opinion. Judge DAVIS wrote the opinion, in which Judge NIEMEYER and Judge SHEDD joined.
Appellants, Elena M. David, Arleen J. Stach, and Victor Hernandez, are the named representatives of a putative class of participants in two retirement plans sponsored by the Bank of America Corporation (“BOA” or “the Bank”). They brought this civil enforcement action under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., alleging that Appellees, the Bank and individual members of the Bank's Corporate Benefits Committee, engaged in prohibited transactions and breached their fiduciary duties by selecting and maintaining Bank-affiliated mutual funds in the investment menu for the Bank's 401(k) Plan and the Bank's separate but related Pension Plan (collectively “the Plans”). The district court dismissed all claims related to the Pension Plan for lack of Article III standing. Thereafter, upon the completion of extensive discovery, the court granted summary judgment in favor of Appellees on all remaining counts as time-barred. Declining to permit the filing of a Fourth Amended Complaint, the district court ultimately dismissed the action with prejudice. This timely appeal followed. For the reasons set forth within, we affirm.1
The Plans are two ERISA-governed retirement plans sponsored by BOA: the 401(k) Plan and the Pension Plan. Appellants are participants in the Plans. Appellees include the Bank, which acts as sponsor of the Plans, and the individual members of the Bank's Corporate Benefits Committee (“CBC”), who act as fiduciaries of the Plans. The CBC has authority to make decisions with respect to adding, monitoring, removing, or replacing investment options in the Plans.
The Pension Plan is a “defined benefit plan” and the 401(k) Plan is a “defined contribution plan.” 2 A participant's benefits under the Pension Plan are based on a “combination of ‘compensation credits' (a percentage of the participant's compensation that increases with age and length of service) and ‘investment credits' (the hypothetical investment return that would be realized if the participant's compensation credits were invested in certain ‘investment measures').” Appellees' Br. at 10. Upon retirement, a participant is entitled at minimum to the full value of her compensation credits, regardless of the performance of the investment measures that the participant selects. BOA, as Plan sponsor, is responsible for making up any shortfall between the returns on the Plan's investments and the amount necessary to fund benefits owed to participants. Any surplus beyond the amount needed to pay benefits reverts to the Plan. The parties agree that the Pension Plan was overfunded (i.e., the Plan's assets were more than sufficient to pay out all vested benefits) when Appellants filed this action.
In contrast, participants in the 401(k) Plan contribute a portion of their pre-tax earnings to the Plan, and those contributions are matched in part by the Bank's affiliates. Individual Plan participants choose how the Plan's assets are invested, but the CBC has authority to change the number of available investment options and to add or remove specific options from the investment lineup.
Appellants filed this action in the Northern District of California on August 7, 2006, and amended their complaint to include class allegations several months later. The case was transferred to the Western District of North Carolina in early 2007. Appellants filed their Second Amended Complaint (“SAC”) by consent on July 31, 2007. Appellants alleged in the SAC that Appellees breached their fiduciary duties and engaged in prohibited transactions in violation of ERISA by selecting and retaining Bank-affiliated mutual funds as part of the investment mix for the Plans. They alleged that many better options were available, and that most of the affiliated mutual funds offered participants poor performance and high fees. Appellants alleged that these violations caused multimillion dollar losses to the Plans.
Appellees filed a motion to dismiss in part, which sought dismissal of the Pension Plan claims in the SAC on the basis that Appellants lacked Article III standing. Appellees also sought dismissal of the CBC on the basis that the committee is not a “person” subject to liability under ERISA § 3(9), 29 U.S.C. § 1002(9), but they did not contest the allegation that the individual members of the CBC were properly before the court. The motion to dismiss was referred to a magistrate judge, who recommended that it be granted. The magistrate judge also recommended that Appellees' motion to dismiss all claims against the CBC be granted because, as a matter of law, “committees are not properly subject to ERISA breach of fiduciary duty claims.” The district court, adopting the findings in the magistrate judge's Memorandum and Recommendation (“M & R”), concluded that Appellants lacked constitutional standing to pursue the Pension Plan claims because they failed to plead any cognizable injury-in-fact likely to be redressed by a favorable outcome in this litigation. The district court also adopted the M & R with respect to Appellees' motion to dismiss all claims against the CBC, noting that Appellants did not object to the magistrate judge's finding. After the district court dismissed Appellants' claims related to the Pension Plan, Appellees answered the SAC.
On May 11, 2010, Appellees moved for summary judgment on Appellants' 401(k) Plan claims, asserting that those claims were time-barred. Soon after the completion of briefing on the Appellees' motion for summary judgment, Appellants moved for leave to file an amended complaint under Federal Rule of Civil Procedure 15, arguing that such amendment would allege “facts and legal theories sufficient to overcome [Appellees'] statute of limitation argument.” David v. Alphin, 817 F.Supp.2d 764, 767 (W.D.N.C.2011) (internal citation omitted). The district court granted Appellants' motion to amend and denied Appellees' motion for summary judgment. Appellants then filed their Third Amended Complaint (“TAC”).
In the TAC, Appellants asserted numerous claims on behalf of the 401(k) Plan on the part of two classes: the “Removal Class” (consisting of 401(k) Plan participants who invested in certain mutual funds between August 7, 2000, and December 31, 2007) and the “Selection Class” (consisting of 401(k) Plan participants who invested in certain mutual funds between July 1, 2000 and December 31, 2007). Of the claims at issue on appeal, Appellants brought Counts I through III on behalf of the Removal Class only; they brought Count IV on behalf of the Selection Class only.3
Specifically, Appellants alleged in Count II that the members of the CBC breached their fiduciary duties of prudence and loyalty by failing to remove the Bank-affiliated mutual funds from the investment lineup.That is, they contend that Appellees effectively applied higher standards for removal of the Bank's proprietary funds than for removal of nonproprietary funds, and that the Removal Class Period funds performed poorly and had significantly higher fees than other viable options. Appellants alleged in Counts I and III that Appellees violated ERISA by causing the 401(k) Plan to engage in prohibited transactions; they assert that the discrete investment transactions that occurred as a result of Appellees' failure to remove the funds constituted transactions between the 401(k) Plan and the investment manager, which was a subsidiary of the...
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