In re Regions Morgan Keegan Erisa Litig..Terry Hamby

• Decision Date: 30 June 2010
• Docket Number: No. 08–2192.,08–2192.
• Citation: 741 F.Supp.2d 844
• Parties: In re REGIONS MORGAN KEEGAN ERISA LITIGATION.Terry Hamby, et al., Plaintiffs.v.Morgan Asset Management, Inc., et al., Defendants.
• Court: U.S. District Court — Western District of Tennessee

741 F.Supp.2d 844

In re REGIONS MORGAN KEEGAN ERISA LITIGATION.Terry Hamby, et al., Plaintiffs.

v.Morgan Asset Management, Inc., et al., Defendants.

No. 08–2192.

United States District Court, W.D. Tennessee, Western Division.

June 30, 2010.

Derek W. Loeser, Lynn L. Sarko, Margaret E. Wetherald, Karin B. Swope, Keller Rohrback, LLP, Seattle, WA, Ellen M. Doyle, Joel R. Hurt, John Stember, Stephen M. Pincus, William T. Payne, Pamina Ewing, Stember Feinstein Doyle Payne & Cordes, LLC, Pittsburgh, PA, Jon C. Goldfarb, Wiggins Childs Quinn & Pantazis, LLC, Peter H. Burke, Richard S. Frankowski, Burke Harvey & Frankowski, LLC, Birmingham, AL, Elizabeth Hutton, Jeffrey Harris, Statman Harris & Eyrich, Cincinnati, OH, Edward W. Ciolko, Joseph H. Meltzer, Donna Siegel Moffa, Barroway Topaz Kessler Meltzer & Check, Radnor, PA, Gregory Y. Porter, Bailey & Glasser, LLP, Washington, DC, Mark T. Johnson, Todd M. Schneider, Schneider Wallace Cottrell Brayton Konecky LLP, San Francisco, CA, for Plaintiffs.W. Brantley Phillips, Jr., Matthew M. Curley, Michael L. Dagley, Bass Berry & Sims PLC, Nashville, TN, Michael A. Brady, Shepherd D. Tate, Bass Berry & Sims PLC, Robert E. Craddock, Jr., Kristen Mistretta Wilson, Wyatt Tarrant & Combs, Memphis, TN, Christopher J. Rillo, Sarah A. Zumwalt, Thomas F. Fitzgerald, Groom Law Group, Chartered, Washington, DC, Grace Robinson Murphy, Jeffrey A. Lee, William B. Wahlheim, Jr., Peter S. Fruin, Maynard Cooper Gale, PC, Birmingham, AL, for Defendants.Thomas S. Gigot, Groom Law Group Chartered, Washington, DC, for Plaintiffs and Defendants.

ORDER DENYING DEFENDANTS' MOTION TO CERTIFY ORDER FOR INTERLOCUTORY APPEAL

SAMUEL H. MAYS, JR., District Judge.

Before the Court is Defendants' April 7, 2010 Motion to Certify the Court's March 9, 2010 Order for Interlocutory Appeal and to Stay Proceedings Pending Resolution of Such Appeal. Plaintiffs responded in opposition on April 28, 2010.

On March 9, 2010, the Court entered an Order Granting in Part and Denying in Part Defendants' Motions to Dismiss certain of Plaintiffs' claim under the Employee Retirement Income Security Act, as amended (“ERISA”). See In re Regions Morgan Keegan ERISA Litig., 692 F.Supp.2d 944 (W.D.Tenn.2010). Plaintiffs' Complaint alleges, inter alia, that Defendants violated ERISA § 404(a)(1)(A)'s duty of prudence and that Defendants violated their duty of disclosure by giving Plaintiffs incomplete and inaccurate information. In declining to dismiss Plaintiffs' prudence claims, the Court held that it would be inappropriate to apply the “presumption of prudence,” as set forth in Kuper v. Iovenko, 66 F.3d 1447 (6th Cir.1995) and Moench v. Robertson, 62 F.3d 553 (3d Cir.1995), at the pleading stage. In re Morgan Keegan, 692 F.Supp.2d at 953–54. In declining to dismiss Plaintiffs' disclosure claims, the Court concluded that Plaintiffs had adequately pled that the missing or incomplete information in Regions' SEC filings, annual reports, and press releases was “converted into [ERISA] fiduciary communications” by its alleged incorporation by reference into Plan ¹ communications, and that Plaintiffs had adequately pled that failure otherwise to disclose such information was a violation of ERISA duties. Id. at 955–56.

Defendants seek to certify two questions for interlocutory appeal: (1) whether the Kuper presumption of prudence should be applied at the pleading stage and (2) whether incorporation by reference of corporate statements into Plan communications converts those statements into fiduciary communications. (Defendants' Motion for Certification of Interlocutory Appeal ¶ 4.) (“Defs.' Mot.”) Defendants also seek a stay of all proceedings until their request for appeal and any resulting appeal are resolved. For the following reasons, the Court DENIES Defendants' Motion to Certify.

I. Standard of Review

28 U.S.C. § 1292(b) provides:

When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing. The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order: Provided, however, That application for an appeal hereunder shall not stay proceedings in the district court unless the district judge or the Court of Appeals or a judge thereof shall so order.

In deciding whether to grant an interlocutory appeal, the Court considers three factors: (1) whether the order involves a “controlling question of law”; (2) whether there is “substantial ground for difference of opinion” about the correctness of the decision; and (3) whether an immediate appeal would “materially advance the ultimate termination of the litigation.” In re City of Memphis, 293 F.3d 345, 350 (6th Cir.2002) (citation omitted). An interlocutory appeal should “be used only in exceptional cases where an intermediate appeal may avoid protracted and expensive litigation.” Cardwell v. Chesapeake & Ohio Ry. Co., 504 F.2d 444, 446 (6th Cir.1974) (citation omitted). There must be “exceptional circumstances [to] justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment.” Coopers & Lybrand v. Livesay, 437 U.S. 463, 475, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978) (citation omitted); see also Cardwell, 504 F.2d at 446 (concluding that the legislative history makes it clear “that Congress intended section 1292(b) should be sparingly applied.”).

II. AnalysisA. Presumption of Prudence

Defendants' Motion focuses primarily on whether the presumption of prudence should be applied by a district court when it is considering a motion to dismiss. The presumption of prudence, as set forth in Kuper and Moench, provides that continuing to offer company stock as an investment option under an employee stock ownership plan is presumed to be consistent with ERISA. Kuper, 66 F.3d at 1459; Moench, 62 F.3d at 571. To overcome that presumption, plaintiffs must make a showing that continuation of the plan's company stock investment fund would frustrate the settler's intent. Moench, 62 F.3d at 571. The Sixth Circuit adopted and applied the Moench presumption in Kuper, on a motion for summary judgment, but has not addressed whether it should be applied on a motion to dismiss. Kuper, 66 F.3d at 1459. In support of their Motion, Defendants note that United States District Judge S. Thomas Anderson, after finding that the presumption of prudence should not be applied on a motion to dismiss, certified the issue for interlocutory appeal. See Sims v. First Horizon Nat'l Corp., No. 08–2293–STA–cgc, 2010 WL 1050976, at *4 (W.D.Tenn. Mar. 22, 2010) (staying all proceedings pending resolution of interlocutory appeal on issue of whether presumption of prudence should apply at the pleading stage). For the following reasons, the Court finds that the extraordinary circumstances necessary to grant an interlocutory appeal on this issue are not present in the instant suit.

1. Substantial Ground for Difference of Opinion

A “difference of opinion” is established “when (1) the issue is difficult and of first impression; (2) a difference of opinion exists within the controlling circuit; or (3) the circuits are split on the issue.” Gaylord Entm't Co. v. Gilmore Entm't Group, 187 F.Supp.2d 926, 956 (M.D.Tenn.2002) (citation omitted). At least fourteen district courts in this Circuit have addressed this issue. It is not one of first impression. District courts in this Circuit have overwhelmingly declined to apply the presumption of prudence at the pleading state, many following the reasoning in In re Diebold Erisa Litigation, where the Court noted that “the Sixth Circuit gave no indication at all [in Kuper ] that it was creating a pleading standard” and that “[c]ourts have consistently rejected application of Kuper at the pleading stage.” No. 5:06 CV 0170, 2008 WL 2225712, at *9 (N.D.Ohio May 28, 2008) (citations omitted); see also, e.g., Taylor v. KeyCorp, 678 F.Supp.2d 633, 640 (N.D.Ohio 2009) (if presumption is applied at the pleading stage, need only allege facts that could rebut the presumption at a later stage); Sims v. First Horizon Nat'l Corp., No. 08–2293–STA–cgc, 2009 WL 3241689, at *22 (W.D.Tenn. Sept. 30, 2009) (declining to extend presumption of prudence on motion to dismiss) (motion for interlocutory appeal currently pending before the Sixth Circuit); Shanehchian v. Macy's, Inc., No. 1:07–CV–00828, 2009 WL 2524562, at *6 (S.D.Ohio Aug. 14, 2009) (plaintiffs not required to plead facts to overcome presumption of prudence; must merely plead sufficient facts to demonstrate plausible basis to overcome presumption of prudence); Banks v. Healthways, Inc., No. 3:08–0734, 2009 WL 211137, at *2 (M.D.Tenn. Jan. 28, 2009) (dismissal under either Kuper or Moench inappropriate on motion to dismiss); In re Ford Motor Co. ERISA Litig., 590 F.Supp.2d 883, 915–16 (E.D.Mich.2008) (denying motion to dismiss where plaintiffs' complaint alleged facts sufficient to give “a ‘reasonably founded hope’ that with further discovery they can make out a case sufficient to rebut the presumption of prudence”); In re Goodyear Tire & Rubber Co. ERISA Litig., 438 F.Supp.2d 783, 793 (N.D.Ohio 2006) (dismissal under either Kuper or Moench inappropriate on motion to dismiss).

Defendants cite Benitez v. Humana, Inc., No. 3:08CV–211–H, 2009 WL 3166651, at *22 (W.D.Ky. Sept. 30, 2009), and In re Ford Motor Co. ERISA Litig., 590 F.Supp.2d at 893 n. 1, for the proposition that there is a difference of opinion within the Circuit about whether the presumption should apply at the pleading stage. (Defs.' Mot....