Evans v. Associated Banc-Corp

• Decision Date: 30 September 2022
• Docket Number: 21-C-60
• Parties: LAURA EVANS, et al., Plaintiffs, v. ASSOCIATED BANC-CORP, et al., Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

LAURA EVANS, et al., Plaintiffs,
v.
ASSOCIATED BANC-CORP, et al., Defendants.

No. 21-C-60

United States District Court, E.D. Wisconsin

September 30, 2022

DECISION AND ORDER GRANTING MOTION TO DISMISS

William C. Griesbach, United States District Judge

Plaintiffs Laura Evans and Carol Nowak-Galkowski brought this action pursuant to the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq. (“ERISA”), against Defendants Associated Banc-Corp (“Associated Bank”), Associated BancCorp Plan Administrative Committee (“the Committee”), Associated Trust Company, N.A., Kellogg Asset Management, LLC, and John and Jane Does 1-20. Plaintiffs assert that Defendants breached their fiduciary duties of prudence and loyalty to the detriment of the Associated BancCorp 401(k) and Employee Stock Ownership Plan (“the Plan”), its participants, and its beneficiaries. They also assert that Associated Bank failed to adequately monitor the fiduciaries responsible for administering the Plan. This Court has jurisdiction pursuant to 28 U.S.C. § 1331. Before the Court is Defendants' motion to dismiss the amended complaint. For the following reasons, the motion will be granted and the case dismissed.

LEGAL STANDARD

A complaint must contain “enough facts to state a claim to relief that is plausible on its face,” and these facts “must raise a right to relief above the speculative level.” Bell Atl.Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). Though the Court recognized in Twombly the need for

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caution before dismissing a case at the pleading stage before discovery has begun, it noted that “a district court must retain the power to insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed.” Twombly, 550 U.S. at 558 (quoting Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519, 528 n.17 (1983)). This is especially true in ERISA class actions. In putative ERISA class actions, Rule 12(b)(6) motions are an “important mechanism for weeding out meritless claims.” Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 425 (2014). Courts apply a “careful, context-sensitive scrutiny of a complaint's allegations” to “divide the plausible sheep from the meritless goats.” Dudenhoeffer, 573 U.S. at 425. Because the circumstances facing an ERISA fiduciary will implicate difficult tradeoffs, “courts must give due regard to the range of reasonable judgments a fiduciary may make based on her experience and expertise.” Hughes v. Northwestern University, 142 S.Ct. 737, 742 (2022). “Where a complaint pleads facts that are merely consist with' a defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. at 678 (internal quotes omitted). And “where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct,” the complaint has not shown that the plaintiff is entitled to relief. Id.

ALLEGATIONS OF THE COMPLAINT

According to the allegations in the complaint, Associated Bank operates their 401(k) and Employee Stock Ownership Plan as a “defined contribution plan.” Am. Compl., ¶ 14, Dkt. No. 19. The Plan “covers eligible employees of Associated Bank and its subsidiaries,” and those eligible employees may “contribute a percentage of their earnings on a pre-tax basis to the Plan.” Id. at ¶ 15. Since 2014, the Plan has had between $453 million and $690 million in assets, between 5,600 and 7,000 participants, and has “consistently ranked in the top half of the 99th percentile of

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all defined contribution plans by size.” Id. at ¶ 16. The complaint alleges that, as of the end of 2014, the investment options under the Plan included (1) seven actively-managed funds organized as collective trusts that were managed by Associated Bank's subsidiary, (2) an Associated Bank money market fund, (3) Associated Bank stock, (4) ten actively-managed funds that were managed by third-parties, and (4) two passively-managed funds offered by Vanguard. Id. at ¶ 17. Throughout the period in question, the Plan has held investments that were “affiliated with Associated Bank.” Id. at ¶ 17.

Plaintiffs allege that Defendants' process for selecting and monitoring the Plan's investment options was “disloyal and imprudent.” Id. at ¶ 33. They claim that Defendants included “proprietary investments overwhelmingly rejected by fiduciaries of similarly sized plans, when a nonconflicted fiduciary would have selected among the more popular and better performing nonproprietary alternatives available.” Id. These proprietary funds, according to Plaintiffs, were “unpopular, excessively expensive, and poorly performing.” Id. Plaintiffs allege that “superior nonproprietary alternatives were available and far more widely utilized by nonconflicted fiduciaries.” Id.

To illustrate their allegations, Plaintiffs offer several examples. First, Plaintiffs point to the “Associated Balanced and Growth Balanced LifeStage Funds.” Id. at ¶ 34. Plaintiffs assert that the Plan has included both of these funds since 2014, but that, based on a review of publicly filed Form 5500s for similarly sized plans, no other plan has offered either fund as an option for its participants. Id. at ¶¶ 34-35. This is for good reason, Plaintiffs allege, because each fund has underperformed its own benchmark and had significantly higher expense ratios than other funds on the market. Id. at ¶ 37-38. A table submitted by Plaintiffs, shown below, demonstrates the Associated Balanced LifeStage Fund's performance and expense ratio as compared to the

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performance and expense ratio of two other funds which had “similar asset allocations and levels of risk, lower fees, and greater acceptance among fiduciaries of similar plans.” Id.

Fund Name	Ticker	3-Yr Return (as of 12/31/15)	5-Year Return (as of 12/31/15)	Current Expense Ratio (as of 8/31/2019)	# of Plans > $500M in Fund
Associated Balanced LifeStage	6.83%	6.04%	0.76%	1 (the Plan)
Associated Balanced LifeStage Custom Benchmark	N/A	7.41%	7.07%	N/A	N/A
Vanguard Wellington Admiral	VWENX	9.64%	9.07%	0.17%	210
American Funds American Balanced R6	RLBGX	10.81%	10.18%	0.27%	75

Plaintiffs claim that a “prudent and loyal review of the marketplace in 2015 would have revealed that the Associated Balanced LifeStage Fund was underperforming its benchmark, and that Vanguard and American Funds options were performing significantly better at lower cost than the Associated Balanced LifeStage Fund.” Id. at ¶ 38. As a result, Plaintiff alleges, “a prudent and loyal fiduciary would have removed the Associated Bank Fund,” and that retention of this fund “reflects a fiduciary process imprudently and disloyally tilted in Associated Bank's favor.” Id.

Plaintiffs offer similar allegations for the Associated Growth Balanced LifeStage Fund. They again assert that other funds in the same class performed significantly better at a lower cost than the Associated Growth Balanced LifeStage Fund. Id. at ¶ 39. Another table provided by Plaintiffs is shown below.

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Fund Name	Ticker	3-Yr Return (as of 12/31/15)	5-Year Return (as of 12/31/15)	Current Expense Ratio (as of 8/31/2019)	# of Plans > $500M in Fund
Associated Growth Balanced LifeStage	8.3%	7.0...