In re Radioshack Corp. Erisa Litigation

• Decision Date: 31 March 2008
• Docket Number: Action No. 4:06-CV-900-Y.,MDL No. 4:08-MD-1875-Y.,Action No. 4:07-CV-285-Y.,MDL No. 1875.,Action No. 4:06-CV-499-Y.
• Citation: 547 F.Supp.2d 606
• Parties: In re: RADIOSHACK CORP. "ERISA" LITIGATION. Robert Maxwell and Robert Outlaw v. RadioShack Corporation, et al. and Jeffrey V. Cormier v. RadioShack Corporation, et al.
• Court: U.S. District Court — Northern District of Texas

547 F.Supp.2d 606

In re: RADIOSHACK CORP. "ERISA" LITIGATION.

Robert Maxwell and Robert Outlaw v. RadioShack Corporation, et al. and Jeffrey V. Cormier v. RadioShack Corporation, et al.

MDL No. 1875.

MDL No. 4:08-MD-1875-Y.

Action No. 4:06-CV-499-Y.

Action No. 4:06-CV-900-Y.

Action No. 4:07-CV-285-Y.

United States District Court, N.D. Texas, Fort Worth Division.

March 31, 2008.

COPYRIGHT MATERIAL OMITTED

Thomas E. Bilek, The Bilek Law Firm LLP, Thomas R. Ajamie, Ajamie LLP, Houston, TX, Thomas J. McKenna, Gainey & McKenna, New York, NY, Kim Zeldin, Ronald S. Kravitz, Liner Yankelevitz Sunshine & Regenstreif LLP, San Francisco, CA, Robert M. Shore, Liner Yankelevitz Sunshine & Regenstreif LLP, Los Angeles, CA, Bradley E. Beckworth, Jeffrey J. Angelovich, Susan R. Whatley, Nix Patterson & Roach, Daingerfield, TX, Claude Edward Welch, Law Office of Claude E. Welch, Lufkin, TX, for Robert Maxwell, Robert Outlaw and Jeffrey V. Cormier.

Rosemary Sage Jones, Ramey & Flock, Tyler, TX, Timothy G. Ackermann, Morgan Lewis & Bockius, Dallas, TX, Victoria L. Gorokhovich, Brian T. Ortelere, Jeremy P. Blumenfeld, Michael L. Banks, Silvia A. Leblanc, Morgan Lewis & Bockius, Philadelphia, PA, David E. Keltner, Hugh G. Connor, II, Marshall M. Searcy, Kelly Hart & Hallman, Kent R. Smith, Lu Pham, Lynn Pham & Ross LLP, Fort Worth, TX, for RadioShack Corporation.

ORDER PARTIALLY GRANTING MOTIONS TO DISMISS AND GRANTING REQUESTS FOR LEAVE TO AMEND

TERRY R. MEANS, District Judge.

Pending before the Court are similar motions to dismiss filed by the defendants in both of the above-referenced cases [document number 36 in 4:06-CV-499-Y and document number 35 in 4:07-CV-285-Y]. After review of the motions, the related briefs, the plaintiffs' complaints, and the applicable law, the Court concludes that the motions should be and hereby are PARTIALLY GRANTED. Nevertheless, the Court concludes that Plaintiffs' requests for leave to amend should be GRANTED.

Plaintiffs, all former employees of defendant RadioShack Corporation ("RadioShack"), brought these actions alleging that they and others similarly situated were harmed when executives at RadioShack permitted investments of the assets of its 401(k) plan and supplemental stock purchase plan ("SUP plan") in RadioShack stock, despite the fact that they knew information about RadioShack's business that made those investments undesirable. In particular, Plaintiffs allege that Defendants knew RadioShack was facing a $62 million write-down of obsolete or unmarketable inventory, but made statements to the contrary and held and continued to invest plan funds in RadioShack stock despite the fact that they knew its price was inflated. Plaintiffs further allege that once the write-down was announced, the price of the stock dropped 8.04 percent and has never recovered. Plaintiffs contend that Defendants' actions constitute breaches of the fiduciary duties they owe to plan participants under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 ("ERISA").

Defendants have moved to dismiss all of the plaintiffs' claims. They contend that certain of the plaintiffs' claims must be dismissed for lack of subject-matter jurisdiction because they lack standing to pursue their claims. The remainder of the plaintiffs' claims are, Defendants contend, subject to dismissal for their failure to state a viable claim for relief.

I. Applicable Law

A. Rule 12(b)(1)

Rule 12(b)(1) authorizes dismissal where the Court lacks subject-matter jurisdiction. "Federal courts are courts of limited jurisdiction" and, as a result, "the burden of establishing federal jurisdiction rests on the party seeking the federal forum." See Howenry v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir.2001).

B. Rule 2(b)(6)

Federal Rule of Civil Procedure 12(b)(6) authorizes the dismissal of a complaint that fails "to state a claim upon which relief can be granted." This rule must, however, be interpreted in conjunction with Rule 8(a). which sets forth the requirements for pleading a claim for relief in federal court. Rule 8(a) calls for "a short and plain statement of the claim showing that the pleader is entitled to relief." FED.R.CIV.P. 8(a); see also Swierkiewicz v. Sorema N.A.. 534 U.S. 506, 508, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (holding Rule 8(a)'s simplified pleading standard applies to most civil actions).

As a result, "[a] motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted." Kaiser Aluminum & Chew. Sales v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982), cert. denied, 459 U.S. 1105, 103 S.Ct. 729, 74 L.Ed.2d 953 (1983) (quoting Wright & Miller, Federal Practice and Procedure § 1357 (1969)). The Court must accept as true all well pleaded, nonconclusory allegations in the complaint and liberally construe the complaint in favor of the plaintiff. Kaiser Aluminum, 677 F.2d at 1050.

The plaintiff must, however, plead specific facts, not mere conclusory allegations, to avoid dismissal. Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir.1992). Indeed, the plaintiff must plead "enough facts to state a claim to relief that is plausible on its face," and his "factual allegations must be enough to raise a right to relief above the speculative level, ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atl. Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1965 & 1974, 167 L.Ed.2d 929 (2007) (abrogating Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), to the extent the Court stated therein that a plaintiff can survive a motion to dismiss "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claims which would entitle him to relief").

In considering a motion to dismiss for failure to state a claim, "courts must limit their inquiry to the facts stated in the complaint and the documents either attached to or incorporated in the complaint." Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017-18 (5th Cir.1996). Documents attached to or incorporated in the complaint are considered part of the plaintiffs pleading. See FED.R.CIV.P. 10(c); Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000); Paulemon v. Tobin, 30 F.3d 307, 308-09 (2nd Cir.1994); Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir.1990). "Where the allegations in the complaint are contradicted by facts established by documents attached as exhibits to the complaint, the court may properly disregard the allegations." Martinez v. Reno, No. 3:97-CV-0813-P, 1997 WL 786250, at *2 (N.D.Tex. Dec. 15, 1997) (citing Nishimatsu Const. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir.1975)); accord Associated Builders, Inc. v. Alabama Power Co., 505 F.2d 97, 100 (5th Cir.1974). Similarly, documents of public record can be considered in ruling on a 12(b)(6) motion to dismiss. Davis v. Bayless, 70 F.3d 367, 372 n. 3 (5th Cir.1995).

II. Analysis

A. Standing

Initially, Defendants contend that plaintiff Maxwell lacks standing because he is no longer a participant in the 401(k) plan and was never a participant in the SUP plan. Defendants make similar arguments as to plaintiff Cormier, who they contend is no longer a participant in the SUP plan.

"[S]tanding to bring an action founded on ERISA is a `jurisdictional' matter." Cobb v. Central States, 461 F.3d 632, 635 (5th Cir.2006). ERISA section 502(a)(2) affords remedies only to benefit plan participants, beneficiaries, and fiduciaries. See 29 U.S.C.A. § 1132(a)(West 1999); Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 139-40, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985). As a result, "the issue of whether a particular plaintiff falls within one of the three enumerated classes of litigants (participants, beneficiaries or fiduciaries) is a jurisdictional one." Cobb, 461 F.3d at 635.

Defendants contend that because plaintiffs Maxwell and Cormier cashed out of the plans, they are no longer ERISA "participants" and thus do not have standing to bring this action. Defendant's arguments are foreclosed, however, by the Supreme Court's recent decision in LaRue v. De-Wolff, Boberg & Assocs., Inc., ___ U.S. ___, 128 S.Ct. 1020, 169 L.Ed.2d 847 (2008). In that case, the Court refused to dismiss as moot the ERISA section 502(a)(2) claims of a former employee of the defendant who had withdrawn his funds from the defendant's defined-contribution plan. The Court noted that ERISA defines "participant" to "include a former employee with a colorable claim for benefits," and cited the Seventh Circuit's decision in Harzewski v. Guidant Corp., 489 F.3d 799 (7th Cir.2007). LaRue, 128 S.Ct. at 1026 n. 6. In Harzewski the Seventh Circuit concluded that former employees who had cashed out of their employer's defined-contribution plan remained ERISA participants for purposes of a section 502(a)(2) claim against the employer for breach of fiduciary duties by allegedly imprudently failing to divest the plan of company stock during a time when the stock's price was fraudulently inflated. As a result, this Court concludes that Maxwell's and Cormier's withdrawal of their funds from the 401(k) or SUP plans does not divest them of standing to pursue their claims.

Defendants further contend that Maxwell lacks standing to pursue any claims regarding the SUP plan because he was never a participant in that plan. Having determined, however, that Maxwell has standing to pursue his claims regarding the 401(k) plan — and thus that he has "demonstrate[d] individual standing vis-asvis the defendant[s]" — the decision of whether he can pursue claims of SUP plan participants challenging similar practices should be left for later determination under Rule 23. See Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 423 (6th Cir. 1998); but cf. In re Mutual Funds Inv. Litig., 519 F.Supp.2d 580, 583-87 (D.Md. 2007) (surmising that recent ...