Krueger v. Ameriprise Fin., Inc.
| Decision Date | 20 November 2012 |
| Docket Number | Case No. 11-cv-02781 (SRN/JSM) |
| Parties | Roger Krueger, Jeffrey Olson, Edward Pope, Deborah Tuckner, Bernice Hillukka, Susan Wones, and Margene Bauhs, individually and as representatives of a class of similarly situated persons, and on behalf of the Ameriprise Financial 401(k) Plan, Plaintiffs, v. Ameriprise Financial, Inc., Ameriprise Financial, Inc. Employee Benefits Administration Committee, Michelle Rudlong, Ameriprise Financial, Inc. 401(k) Investment Committee, Compensation and Benefits Committee of the Board of Directors of Ameriprise Financial, Inc., Ira D. Hall, Warren D. Knowlton, W. Walker Lewis, Siri S. Marshall, Jeffrey Noddle, Richard F. Powers III, Robert F. Sharpe, Jr., John Does 1-60, Jeffrey P. Fox, Phil Wentzel, Jeffrey A. Williams, Martin S. Solhaug, Kristi L. Peterson, Timothy V . Bechtold, and Brent Sabin, Defendants. |
| Court | U.S. District Court — District of Minnesota |
Jerome J. Schlichter, Mark G. Boyko, and Michael A. Wolff, Schlichter Bogard & Denton, Lisa Lamm Bachman, Fafinski Mark & Johnson, P.A., Prairie Center Drive, Thomas W. Pahl, Foley & Mansfield, PLLP, for Plaintiffs.
Stephen P. Lucke and Kirsten E. Schubert, Dorsey & Whitney LLP, Benjamin G. Bradshaw and Shannon M. Barrett, O'Melveny & Myers LLP, for Defendants.
This matter is before the Court on Defendants Ameriprise Financial, Inc., Ameriprise Financial, Inc. Employee Benefits Administration Committee, Michelle Rudlong, Ameriprise Financial, Inc. 401(k) Investment Committee, Compensation and Benefits Committee of the Board of Directors of Ameriprise Financial, Inc., Ira D. Hall, Warren D. Knowlton, W. Walker Lewis, Siri S. Marshall, Jeffrey Noddle, Richard F. Powers III, Robert F. Sharpe, Jr., John Does 1-60, Jeffrey P. Fox, Phil Wentzel, Jeffrey A. Williams, Martin S. Solhaug, Kristi L. Peterson, Timothy V. Bechtold, and Brent Sabin's (collectively "Defendants") Motion to Dismiss the First Amended Complaint for Failure to State a Claim. (Doc. No. 57.) For the reasons stated below, the Court grants in part and denies in part Defendants' Motion.
Defendant Ameriprise Financial, Inc. ("Ameriprise") is a holding company that provides financial planning, insurance, investment funds, and other services to customers through subsidiaries including Ameriprise Trust Company ("ATC"), RiverSource Investments LLC ("RiverSource"),1 Ameriprise Financial Services, Inc., and Ameriprise Retirement Services. (Am. Compl., Doc. No. 45, ¶¶ 43-50.) Ameriprise was once part ofAmerican Express Companies ("American Express") and its employees were covered by the American Express retirement plan. (Defs.' Mem. of Law in Supp. of Mot. to Dismiss, Doc. No. 59 ("Defs.' Mem.") at p. 6; Am. Compl. ¶ 44.) When Ameriprise spun off from American Express in October 2005, the Ameriprise Financial 401(k) retirement benefit plan (the "Plan") "cloned" the American Express 401(k) plan, including all of its investments. (Id.; see also Decl. of Brent Sabin, Doc. No. 60 ("Sabin Decl.), Ex. 1, 2005 Summary Plan Description ("2005 SPD") at p. i; Am. Compl. ¶¶ 7-8.) Ameriprise is now the Plan sponsor and party of interest to the Plan under 29 U.S.C. § 1002(14). (Am. Compl. ¶ 37.)
The Plan is a "defined contribution plan" under 29 U.S.C. § 1002(34) and "employee pension benefit plan" under 29 U.S.C. § 1002(2), meaning that participants contribute to individual accounts, select from a menu of investments for the account assets, and receive their value at retirement. (Am. Compl. ¶¶ 5-6.) The Plan is also a qualified plan under 26 U.S.C. § 401 and is commonly referred to as a "401(k) Plan." (Id. ¶ 7.) It is available to eligible employees and retirees of Ameriprise and its subsidiaries and affiliates, and Ameriprise matches a portion of the participants' contributions. (Id. ¶ 9; 2005 SPD at pp. 1, 4, 36, Sabin Decl. Ex. 6, 2011 Summary Plan Description ("2011 SPD") at p. 5.) Participants are free to move their Plan balances among investment options on a daily basis. (2011 SPD at p. 22; Sabin Decl., Ex. 10 at §§ 6.2(c).)
Two named fiduciary committees have primary responsibility for administering the Plan. Ameriprise's Employee Benefits Administration Committee ("EBAC") is the Plan administrator under 29 U.S.C. § 1002(16)(A) and is responsible for determining benefits eligibility and construing Plan documents. EBAC has administered the Plan since October 2005 and its members are appointed by Ameriprise's Compensation and Benefits Committee of the Board of Directors ("CBC"). (Am. Compl. ¶¶ 20, 56.) The CBC also supervises EBAC and has the authority to remove its members. (Id. ¶¶ 32, 121.) The Ameriprise Financial, Inc. 401(k) Investment Committee ("Investment Committee") also administers the Plan by selecting and monitoring the investment options in the Plan lineup. (Am. Compl. ¶¶ 26, 56.) The Investment Committee directs how investment options for the Plan are invested. (Id.)
The Ameriprise Plan document authorizes investment of Plan assets in a wide variety of investment vehicles, including both mutual funds2 and collective trusts. (Sabin Decl. Ex. 13 § 5.2.) When the Plan was first developed, it offered participants several investment options, including an Ameriprise stock fund, an income fund devoted primarily to government bonds, several mutual funds and collective trusts managed by Ameriprise affiliates and others, and a self-directed brokerage window through which participants could invest in hundreds of other non-affiliated mutual funds. (2005 SPD at pp. 13-23; Am. Compl. ¶¶ 55, 83-86.)
The Plan currently offers three groups of investment options. (Decl. of Shannon Barrett, Doc. No. 61 ("Barrett Decl.") Ex. C.) Tier 1 consists of several "target maturity funds" that are designed for participants who do not wish to put together their own individualized mix of investment options and who have a likely retirement date. (Id.; 2011SPD at 14, 19) Tier 2 comprises "core investments," including an Ameriprise stock fund, an income fund, and other mutual fund and collective trust options. (Barrett Decl. Ex. C; 2011 SPD at pp. 15-19.) Tier 3 is the Plan's Self-Managed Brokerage Account ("SMBA"), through which Plan participants can individually invest in funds offered by a variety of investment managers. (Id.; 2011 SPD at 320) In January 2011, the Plan switched brokerage windows, from one managed by Ameriprise that offered approximately 900 investment funds to one managed by Charles Schwab that offers over 6,000 funds. (Id.; Am. Compl. ¶ 85.)
The 2011 Summary Plan Descriptions ("SPDs") distributed to Plan participants disclose the investment options' objective and historical performance, as well as expense ratios3 for target maturity funds and core investments. (2011 SPD at pp. 25-27.) The SPDs do not describe the SMBA mutual funds or provide performance histories for those funds. (Cf. id.)
The Plan's assets are held by trustees selected by the Investment Committee. (Sabin Decl. Ex. 10 §§ 6.1, 12.1.) ATC was the trustee and record-keeper of the Plan until Ameriprise sold its record-keeping business, including ATC, in March 2007 to Wachovia Corporation, which then became the Plan's trustee and record-keeper. (Am. Compl. ¶¶ 10-11.) Wachovia became a part of Wells Fargo & Company ("Wells Fargo") effective December 31, 2008. (Id. ¶ 12.) Wells Fargo is currently the trustee and record-keeper for assets invested in the target maturity funds and core investment options, while CharlesSchwab is the trustee for assets in the SMBA. (Sabin Decl. Exs. 11-13; Am. Compl. ¶¶ 10-12.) Under the Plan's terms, Plan administration and reasonable trustee expenses are to be paid from Plan assets. (Sabin Decl. Ex. 10 § 10.7.)
Plaintiffs are three current and four former participants in the Plan who seek to represent a class of all participants in and beneficiaries of the Plan since its inception in October 2005. (Am. Compl. ¶ 1, 13-19, 105.) Plaintiffs allege that the Plan has invested "hundreds of millions of dollars in mutual funds managed by Ameriprise subsidiaries RiverSource . . . as well as, commingled trusts managed by ATC" despite "many investment options available in the market." (Id. ¶ 53–54.) Plaintiffs claim that these investment options were "chosen because they were managed by, paid fees to, and generated profits for Ameriprise, its subsidiaries, and Wachovia." (Id.) Plaintiffs state that the Plan's investment in RiverSource and ATC averaged approximately $500,000,000 per year from October 1, 2005 to the present. (Id. ¶ 57.)
Plaintiffs note that Defendants invested in RiverSource mutual funds, which were newly created when the target maturity funds invested in them and had no performance history. (Id. ¶ 78.) Indeed, the "Plan was the first investor in the Funds." (Id.) Plaintiffs claim "Ameriprise used the retirement assets of [its] employees to seed new and untested mutual funds, which made those funds more marketable to outside investors, thus increasing profits for RiverSource and its parent, Ameriprise." (Id.)
Plaintiffs further allege that the RiverSource mutual funds that the Plan invested in performed poorly. The funds underperformed their benchmarks each year by 0.62%,4.22%, 7.05%, 9.89%, 12.62%. and 1.75%. (Id. ¶ 68.) Plaintiffs note that Morningstar, an independent rating service, gave the funds lower ratings than other comparable funds. (Id. ¶ 69.) A web-based investment application called MyPlanIQ rated the risk-adjusted returns of the Ameriprise Plan's investments in the bottom 2% of defined contribution plans with respect to fund quality. (Id. ¶ 70.) Other RiverSource funds had no rating at all because they lacked any performance history when placed in the Plan. (Id. ¶ 79.) Furthermore, Plaintiffs argue that "prudent" investors left...
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...of which it found few. See, e.g., Adedipe v. U.S. Bank N.A., 62 F. Supp. 3d 879 (D. Minn. 2014); Krueger v. Am. Fin. Inc., No. 11-cv-02781 (SRN/JSM), 2012 WL 5873825 (D. Minn. Nov. 20, 2012); Martin v. Nat'l Bank of Alaska, 828 F. Supp. 1427 (D. Alaska 1992). The court in Krueger explained ......