Kendall v. Pharm. Prod. Dev., LLC
| Decision Date | 31 March 2021 |
| Docket Number | No. 7:20-CV-71-D,7:20-CV-71-D |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | KARL KENDALL, SUZANNE RAINEY, and VINCENZO PERNICE, Plaintiffs, v. PHARMACEUTICAL PRODUCT DEVELOPMENT, LLC, et al., Defendants. |
On April 15, 2020, Karl Kendall, Suzanne Rainey, and Vincenzo Pernice (collectively, "plaintiffs") filed a complaint against Pharmaceutical Product Development, LLC ("PPD"), the Board of Directors of PPD (the "Board"), the Benefits Administrative Committee (the "Committee"), and John Does 1-30 (collectively, "defendants") [D.E. 1]. Plaintiffs allege that the Committee breached its fiduciary duties of loyalty and prudence under section 404(a) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1104(a) (count one), and that PPD and the Board breached their duty to monitor the Committee (count two). See id. On July 31, 2020, pursuant to Federal Rules of Civil Procedure 12(b)(1) and (b)(6), defendants moved to dismiss the complaint [D.E. 19], and filed a memorandum in support [D.E. 20]. On August 21, 2020, plaintiffs responded in opposition [D.E. 21]. On September 4, 2020, defendants replied [D.E. 22]. As explained below, the court grants in part and denies in part defendants' motion to dismiss, dismisses a portion of the claims, and dismisses plaintiffs' request for injunctive relief.
This putative class action concerns defendants' selection and maintenance of investment options in the PPD Retirement Savings Plan (the "Plan"). See Compl. [D.E. 1]. PPD is a leading global contract research organization and pharmaceutical product development company based in Wilmington, North Carolina. See id. ¶¶ 18-19. PPD sponsors the Plan—a defined contribution, individual account plan under ERISA § 3(34), 29 U.S.C. § 1002(34)—for eligible employees. See id. ¶¶ 18, 33-35. Employees make pre- and post- tax contributions to individual accounts, and PPD makes matching contributions. See id. ¶¶ 33-41. Between 2014 and 2020 (the "Class Period"), the Plan offered participants various investment options. See id. ¶ 43.
PPD is the named fiduciary responsible for administering the Plan. See id. ¶¶ 20-24. PPD, acting through the Board, delegated fiduciary responsibilities for selection and retention of the Plan's investment options to the Committee. See id. ¶¶ 25-31. The Plan's recordkeeper is Massachusetts Mutual Life Insurance Company ("Mass Mutual"). See id. ¶ 113. Recordkeeping consists of administrative tasks including claims processing, loan processing, disclosures, participant education, and other consulting services. See id.
Plaintiffs are former employees of PPD who allege they participated in the Plan during the Class Period. See id. ¶¶ 13-15. Plaintiffs admit that they lack knowledge of defendants' decisionmaking process with respect to the Plan. See id. ¶ 17. Nonetheless, plaintiffs allege that defendants "failed to have a proper system of review in place to ensure that participants in the Plan were being charged appropriate and reasonable fees for the Plan's investment options." Id. ¶ 63. Plaintiffs also allege that defendants failed to leverage the size of the Plan to negotiate for lower expense ratios for certain investment options maintained or added to the Plan during the Class Period and lower recordkeeping and administrative fees. See id. Pursuant to ERISA sections 409 and 502,29 U.S.C. §§ 1109 and 1132, plaintiffs bring a class action on behalf of all participants and beneficiaries of the Plan during the Class Period against defendants in their fiduciary capacities. See id. ¶¶ 1, 47-53.
Plaintiffs allege that the Committee breached its fiduciary duties in failing to investigate and select lower cost alternative funds including (1) lower fee share classes, (2) separate accounts or collective trusts as alternatives to mutual funds, and (3) passively-managed funds over actively-managed funds. See id. ¶¶ 76-112. Plaintiffs also allege that the Committee breached its fiduciary duties in failing to monitor recordkeeping fees. See id. ¶¶ 113-31, 135. Count one alleges that the Committee breached its fiduciary duties of loyalty and prudence under ERISA § 404(a), 29 U.S.C. § 1104(a). See id. ¶¶ 132-38. Count two alleges that PPD and the Board breached their derivative duty to monitor the Committee. See id. ¶¶ 139-45. Plaintiffs seek, among other things, monetary and injunctive relief.
A motion to dismiss under Rule 12(b)(6) tests the complaint's legal and factual sufficiency. See Ashcroft v. Iqbal, 556 U.S. 662, 677-80 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554-63 (2007); Coleman v. Md. Court of Appeals, 626 F.3d 187, 190 (4th Cir. 2010), aff'd, 566 U.S. 30 (2012); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). To withstand a Rule 12(b)(6) motion, a pleading "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 678 (quotation omitted); see Twombly, 550 U.S. at 570; Giarratano, 521 F.3d at 302. In considering the motion, the court must construe the facts and reasonable inferences "in the light most favorable to [the nonmoving party]." Massey v. Ojaniit, 759 F.3d 343, 352 (4th Cir. 2014) (quotation omitted); see Clatterbuck v. City of Charlottesville, 708 F.3d 549, 557 (4th Cir. 2013), abrogated on other grounds by Reed v. Town of Gilbert, 576 U.S. 155 (2015). A court need not accept as true a complaint's legal conclusions,"unwarranted inferences, unreasonable conclusions, or arguments." Giarratano, 521 F.3d at 302 (quotation omitted); see Iqbal, 556 U.S. at 678-79. Rather, a plaintiff's factual allegations must "nudge[] [his] claims," Twombly, 550 U.S. at 570, beyond the realm of "mere possibility" into "plausibility." Iqbal, 556 U.S. at 678-79.
When evaluating a motion to dismiss, a court considers the pleadings and any materials "attached or incorporated into the complaint." E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 448 (4th Cir. 2011); see Fed. R. Civ. P. 10(c); Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th Cir. 2016); Thompson v. Greene, 427 F.3d 263, 268 (4th Cir. 2005). A court also may consider a document submitted by a moving party if it is "integral to the complaint and there is no dispute about the document's authenticity" without converting the motion into one for summary judgment. Goines, 822 F.3d at 166. "[I]n the event of conflict between the bare allegations of the complaint and any exhibit attached . . . , the exhibit prevails." Id. (quotation omitted); see Fayetteville Invs. v. Com. Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991). Additionally, a court may take judicial notice of public records. See, e.g., Fed. R. Evid. 201; Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 322 (2007); Philips v. Pitt Cnty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009).
In count one, plaintiffs allege that the Committee breached its duty of prudence by failing to investigate and select lower cost alternative funds. See Compl. [D.E. 1] ¶¶ 76-112, 135. ERISA seeks to protect beneficiaries of employee benefit plans. See Pension Benefit. Guar. Corp. ex rel. St. Vincent Cath. Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 715 (2d Cir. 2013); DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 417 (4th Cir. 2007). Thus, "[a]n ERISA fiduciary must act with the care, skill, prudence, and diligence that a prudent person acting in a likecapacity and familiar with such matters would use." Tibble v. Edison Int'l, 575 U.S. 523, 523 (2015) (quoting 29 U.S.C. § 1104(a)(1)); see Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 419 (2014). The fiduciary duty of prudence "derive[s] from the common law of trusts." Tibble, 575 U.S. at 523 (quotation omitted); Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 570 (1985); see Sweda v. Univ. of Penn., 923 F.3d 320, 327 (3d Cir. 2019); St. Vincent, 712 F.3d at 716.
Under the duty of prudence, an ERISA fiduciary must consider "those facts and circumstances that, given the scope of such fiduciary's investment duties, the fiduciary knows or should know are relevant to the particular investment or investment course of action involved." 29 C.F.R. § 2550.404a-1(b)(1)(i); see Stegemann v. Gannett Co., 970 F.3d 465, 473 (4th Cir. 2020). Fiduciaries also must investigate and review options for an ERISA plan's assets, considering not only "the merits of a transaction, but also . . . the thoroughness of the investigation into the merits of that transaction." Stegemann, 970 F.3d at 474 (alterations and quotations omitted); DiFelice, 497 F.3d at 418. An adequate investigation of existing investments considers whether any of the plan's investments are "improvident" or if a "superior alternative investment" exists. St. Vincent, 712 F.3d at 718-19; see Tibble, 575 U.S. at 523; Stegemann, 970 F.3d at 473 & n.7; Sweda, 923 F.3d at 328. Moreover, a fiduciary must account for changed circumstances that increase risk of loss. See St. Vincent, 712 F.3d at 717.
A fiduciary breaches its duty of prudence when it "fail[s] to properly monitor investments and remove imprudent ones." Tibble, 575 U.S. at 523. The elements of an ERISA breach of fiduciary duty claim are "(1) a plan fiduciary (2) breaches an ERISA-imposed duty (3) causing a loss to the plan." Sweda, 923 F.3d at 328; see Meiners v. Wells Fargo & Co., 898 F.3d 820, 822 (8th Cir. 2018). For purposes of their motion to dismiss, defendants do not contest the first and thirdelements. Thus, the court considers whether plaintiffs have plausibly alleged that the Committee breached its fiduciary duties of loyalty and prudence.
In determining whether a fiduciary has acted prudently, a court examines the fiduciary's conduct "under the circumstances then prevailing." 29 U.S.C. § 1104(a)(1)(B); see Dudenhoeffer, 573 U.S. at 415; Tatum v. RJR Pension Inv. Comm., 761 F.3d 346, 358 (4th Cir. 2...
To continue reading
Request your trial