McCaffree Fin. Corp. v. Principal Life Ins. Co.

Decision Date10 December 2014
Docket NumberCase No. 4:14–cv–00102–SMR–HCA.
Citation65 F.Supp.3d 653
PartiesMcCAFFREE FINANCIAL CORP. on behalf of the McCaffree Financial Corp. Employee Retirement Program, on behalf of a class of those similarly situated, Plaintiff, v. PRINCIPAL LIFE INSURANCE COMPANY, Defendant.
CourtU.S. District Court — Southern District of Iowa

Joseph R. Gunderson, Gunderson Sharp LLP, Des Moines, IA, Alexander T. Ricke, John F. Edgar, John M. Edgar, Edgar Law Firm LLC, Kansas City, MO, Garrett W. Wotkyns, Michael C. McKay, Patrick J. Van Zanen, Schneider Wallace Cottrell Konecky LLP, Scottsdale, AZ, Jason H. Kim, Todd M. Schneider, Schneider Wallace Cottrell Konecky, San Francisco, CA, for Plaintiff.

Angel Anna West, Nyemaster Goode PC, Des Moines, IA, Eric S. Mattson, Joel S. Feldman, Sidley Austin LLP, Chicago, IL, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

STEPHANIE M. ROSE, District Judge.

I. INTRODUCTION

This is a case brought under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et seq.

In all cases such as this, the threshold question is the same: whether the alleged fiduciary was acting as a fiduciary when taking the action subject to the complaint. Pegram v. Herdrich, 530 U.S. 211, 226, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000). Plaintiff McCaffree Financial Corp. alleges Defendant Principal Life Insurance Company is a fiduciary under three subsections of 29 U.S.C. § 1002(21)(A)(i)(iii). [Compl. ¶ 53, ECF No. 1]. Raising two arguments, Defendant contends it is not a fiduciary. [Defendant's Motion to Dismiss (“Def.'s Mot. to Dismiss), ECF No. 34; Def. Principal Life Ins. Co.'s Mem. in Supp. of Mot. to Dismiss (“Def.'s Br.”) at 3–11, ECF No. 34–1]. Because the Court concludes Defendant was not acting as a fiduciary at the time the fees and expenses were negotiated, Defendant is not a fiduciary under 29 U.S.C. § 1002(21)(A)(i). This conclusion is not dispositive of all Plaintiff's allegations, however, so the Court must consider Defendant's second argument for dismissal. Because the Court concludes the remaining acts alleged to support fiduciary status lack a “nexus” with the alleged excessive fees, Defendant is not a fiduciary under § 1002(21)(A)(ii) or § 1002(21)(A)(iii). Accordingly, the Court grants Defendant's Motion to Dismiss.

A. Procedural Background of this Motion

Defendant moves to dismiss the Class Action Complaint (“Complaint”) with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6).1 [Def.'s Mot to Dismiss at 1]. Plaintiff filed a response (“Pl.'s Br.”) [ECF No. 42], and Defendant filed a reply [ECF No. 43]. Defendant requested oral argument, which was held on October 23, 2014. [ECF No. 51; see also Transcript, ECF No. 52]. Before oral argument was held, Defendant filed supplemental authority [ECF No. 47], and Plaintiff filed objections [ECF No. 48]. Also, Defendant clarified previously cited authority [ECF No. 49], and Plaintiff responded [ECF No. 50]. The matter is fully submitted.

II. STANDARD OF REVIEW
A. General Principles Under Rule 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) provides a motion to dismiss for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Rule 8 requires a complaint to contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). To meet this standard, and thus survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ Braden v. Wal–Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir.2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). A claim is plausible on its face “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. Although the plausibility standard “is not akin to a ‘probability requirement,’ it does demand “more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).

Several principles guide courts assessing whether a complaint states a plausible claim for relief. Braden, 588 F.3d at 594. Courts must accept as true a plaintiff's factual allegations, but they need not accept as true a plaintiff's legal conclusions. Brown v. Medtronic, Inc., 628 F.3d 451, 459 (8th Cir.2010). Courts must draw all reasonable inferences in favor of plaintiffs. Crooks v. Lynch, 557 F.3d 846, 848 (8th Cir.2009). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.

Still more principles guide courts. Courts may look to documents attached to or incorporated within a complaint “to determine whether a plaintiff has stated a plausible claim.” Brown, 628 F.3d at 459–60. And instead of parsing complaints to determine whether isolated allegations are plausible, courts should read complaints as a whole. Braden, 588 F.3d at 594. After all, evaluating a complaint “is ‘a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.’ Id. (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 ).

Consistent with these principles, the Supreme Court of the United States has developed a two-pronged approach for deciding whether a complaint states a plausible claim for relief. Iqbal, 556 U.S. at 679, 129 S.Ct. 1937. First, courts should begin by “identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.” Id. After disregarding these conclusions, courts should assume the veracity of the remaining factual allegations and “determine whether they plausibly give rise to an entitlement to relief.” Id. “The facts alleged in the complaint ‘must be enough to raise a right to relief above the speculative level.’ Clemons v. Crawford, 585 F.3d 1119, 1124 (8th Cir.2009) (quoting Drobnak v. Andersen Corp., 561 F.3d 778, 783 (8th Cir.2009) ).

B. Principles Specific to Rule 12(b)(6) Motions in ERISA Cases

This ERISA case implicates other important tenets. Mindful of Congress's intent to give individuals “an important role in enforcing ERISA's fiduciary duties,” the United States Court of Appeals for the Eighth Circuit has instructed courts to “be cognizant of the practical context of ERISA litigation.” Braden, 588 F.3d at 598. Courts must take account of plaintiffs' generally limited access to information at the pleading stage. Id. Courts must not forget the effect of requiring plaintiffs, in order to successfully state a claim, to plead “facts which tend systemically to be in the sole possession of defendants.” Id. If courts require plaintiffs to plead such facts to state a claim, ERISA's remedial scheme will fail. Id. If the remedial scheme fails, “the crucial rights secured by ERISA will suffer.” Id. Hence, before concluding an ERISA complaint's factual allegations “do not support a plausible inference that the plaintiff is entitled to relief,” courts must perform a “careful and holistic evaluation” of those allegations. Id.

III. FACTS

Accepting the truth of Plaintiff's factual allegations, as the Court must at this stage, Brown, 628 F.3d at 459, the relevant facts are as follows: Plaintiff sponsors for its employees a retirement plan governed by ERISA, the McCaffree Financial Corp. Employee Retirement Program (McCaffree Plan) (a 401(k) plan).2 [Compl. ¶¶ 1, 4]. Plaintiff is the administrator of the McCaffree Plan. Id. Defendant is a life insurance company and is part of Principal Financial Group. Id. ¶¶ 6–7. Defendant provides services to 401(k) plans. Id. ¶ 8.

Plaintiff and Defendant entered into a “Group Annuity Contract” dated September 1, 2009 (and subsequently amended). Id. ¶ 5. Under this contract, Defendant offers investment options for participants in the McCaffree Plan and provides other services in connection with the Plan in exchange for various fees and charges. Id. ¶ 13. The Group Annuity Contract includes a “Separate Investment Account Rider” that allows participants in the McCaffree Plan to invest in Defendant's “Separate Accounts.” Id. ¶ 14.3 Under the Separate Investment Account Rider, Defendant agrees to make available a curated menu of investment options that will be chosen from 63 separate accounts. Id. ¶ 23; [see also Def.'s Mot. to Dismiss, Ex. A, Separate Investment Account Rider at 1–2; ECF No. 34–3]. Defendant reserves the right to limit both the number of separate accounts available under the contract and the number available to each Member. [Compl. ¶ 17; Separate Investment Account Rider at 1]. Defendant also reserves the right to allow participation in separate accounts in addition to those listed in the Separate Investment Account Rider. [Compl. ¶ 17]. Plaintiff, for its part, “may send [Defendant] Written Notification indicating you want the contract administered so that assets held under this contract will not participate in one or more of these Separate Accounts.” [Separate Investment Account Rider at 2].

The Separate Investment Account Rider describes “Operating Expenses” and “Management Fees.” Plaintiff alleges Defendant unilaterally sets its own Management Fee and Operating Expenses in connection with its separate accounts. [Compl. ¶ 28]. The Management Fee under each separate account “will be a percentage of the value of assets in such Separate Account, subject to the equivalent of a maximum annual percentage listed in the Table of Separate Account Features.” [Separate Investment Account Rider at 18]. In other words, Defendant maintains the power to unilaterally set the Management Fee for the separate accounts, subject to a maximum fee of 3% (except for one of the separate accounts), and to change the Management Fee at its discretion by...

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