Pledger v. Reliance Trust Co.

• Citation: 240 F.Supp.3d 1314
• Decision Date: 07 March 2017
• Docket Number: CIVIL ACTION FILE NO. 1:15–CV–4444–MHC
• Parties: Ronda A. PLEDGER, Sandra Britt, Jennifer L. Primm, Alex Brooks, Jr., and Edward Comer Buck, Individually and as Representatives of a class of similarly situated persons of the Insperity 401(k) Plan, Plaintiffs, v. RELIANCE TRUST COMPANY, Insperity, Inc., Insperity Holdings, Inc., Insperity Retirement Services, L.P., Insperity Retirement Plan Committee, and John Does 1–20, Defendants.
• Court: U.S. District Court — Northern District of Georgia

240 F.Supp.3d 1314

Ronda A. PLEDGER, Sandra Britt, Jennifer L. Primm, Alex Brooks, Jr., and Edward Comer Buck, Individually and as Representatives of a class of similarly situated persons of the Insperity 401(k) Plan, Plaintiffs,

v.RELIANCE TRUST COMPANY, Insperity, Inc., Insperity Holdings, Inc., Insperity Retirement Services, L.P., Insperity Retirement Plan Committee, and John Does 1–20, Defendants.

CIVIL ACTION FILE NO. 1:15–CV–4444–MHC

United States District Court, N.D. Georgia, Atlanta Division.

Signed March 7, 2017

Bradley S. Wolff, Swift Currie McGhee & Hiers, Atlanta, GA, Heather Lea, Jerome J. Schlichter, Kurt C. Struckhoff, Michael A. Wolff, Troy A. Doles, Schlichter

Bogard & Denton, LLP, St. Louis, MO, for Plaintiffs.

Abby Johnston, Taylor Simeone, O'Melveny & Myers, LLP, New York, NY, Benjamin Bradshaw, Brian D. Boyle, John McDermott, Shannon M. Barrett, O'Melveny & Myers, Emily Seymour Costin, Alston & Bird, LLP, Washington, DC, William Bard Brockman, Bryan Cave, LLP, Emily Catherine Hootkins, Howard Douglas Hinson, Patrick Connors DiCarlo, Alston & Bird, LLP, Atlanta, GA, for Defendants.

ORDER

MARK H. COHEN, United States District Judge

This case comes before the Court on Defendants Insperity, Inc., Insperity Retirement Services, L.P., Insperity Holdings, Inc., and Insperity Retirement Plan Committee's (collectively, the "Insperity Defendants") Motion to Dismiss the Complaint [Doc. 29], Defendant Reliance Trust Company's ("Reliance") Motion to Dismiss the Complaint [Doc. 32], the Insperity Defendants' Motion to Dismiss Plaintiffs' Amended Complaint [Doc. 41], Reliance's Motion to Dismiss Plaintiffs' Amended Complaint [Doc. 43], Plaintiffs Sandra Britt, Alex Brooks, Jr., Edward Comer Buck, Ronda A. Pledger, and Jennifer L. Primm's (collectively, "Plaintiffs") Motion for Leave to File Second Notice of Supplemental Authority in Opposition to Motions to Dismiss [Doc. 63], and Plaintiffs' Consent Motion for Leave to File Third Notice of Supplemental Authority in Opposition to Motions to Dismiss [Doc. 64].¹

I. BACKGROUND

Plaintiffs are participants in the Insperity 401(k) Plan (the "Plan"), a defined contribution, individual account, employee pension retirement plan under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 – 1461 ("ERISA"). Am. Compl. [Doc. 37] ¶¶ 6, 13–17; 29 U.S.C. § 1002(34). The Plan is one of the largest 401(k) plans in the United States, with over $2 billion in assets and 50,000 participants. Am. Compl. ¶ 12.

Defendant Insperity, Inc. ("Insperity") is a "professional employer organization" (PEO) that offers the Plan to employees of small- and medium-sized businesses that contract with Insperity to provide human resources services. Id. ¶¶ 8–9, 19. In marketing the Plan, Insperity admits that it is the "plan sponsor" and "assumes all of the responsibilities inherent in plan sponsorship, including fiduciary obligations." Id. ¶ 33. In annual reports filed with the Department of Labor, Insperity states that the Plan is a "single-employer plan." Id. ¶¶ 10, 80. Insperity administers the Plan through its subsidiaries. Id. ¶ 20.

Defendants Insperity Holdings, Inc. ("Holdings") and Insperity Retirement Services, L.P. ("Retirement Services") are wholly-owned subsidiaries of Insperity. Id. ¶¶ 21, 26. Holdings is named in the Plan as the fiduciary responsible for the Plan's control, management, and administration. Id. ¶ 22. Holdings, pursuant to its authority to delegate any of its responsibilities under the Plan, "delegated its fiduciary responsibility to hold, manage, and control the assets of the Plan" to Reliance, including "the selection, retention, and monitoring of [the] Plan['s] investment options," but retained the responsibility for the selection, retention, and compensation of the Plan's administrative service providers. Id. ¶¶ 23, 57. Retirement Services has served as the Plan's record keeper since October 1, 2003. Id. ¶ 26.

Reliance functions as the Plan's discretionary trustee "to hold, manage and control the assets of the Plan" under a Trust Agreement with Holdings, and is responsible for the selection, retention, and monitoring of the Plan's investment options. Id. ¶¶ 18, 23, 57–58. Reliance also is responsible for selecting investments that compensate Retirement Services for providing record keeping services for the Plan. Id. ¶¶ 58, 77.²

Plaintiffs contend that Defendants breached their fiduciary duties and committed prohibited transactions under ERISA in a number of ways: (1) by selecting untested proprietary funds as investment options for the Plan and retaining those funds despite their poor performance, which benefited Defendants at the expense of participants (Am. Compl. ¶¶ 61–74; 170–74) (Count I); (2) by selecting Retirement Services as the Plan's record keeper, paying it excessive administrative expenses, and failing to monitor and control the amount of those administrative expenses (id. ¶¶ 75–85; 176–80) (Count II); (3) by providing to the Plan investment options that contained unreasonable management fees when cheaper versions of the same investments were available to the Plan, as were other high-quality, low-cost institutional alternatives (id. ¶¶ 86–127; 182–89) (Count III); (4) by providing as a Plan investment an imprudent money market fund that was not in the sole interest of participants and did not provide meaningful retirement benefits without considering a stable value fund option, and then providing an imprudent proprietary stable value fund (id. ¶¶ 128–36; 191–96) (Count IV); (5) by failing to properly monitor the Plan's fiduciaries (id. ¶¶ 137–44, 198–203) (Count V); (6) by engaging in prohibited transactions with a party in interest by putting proprietary investments in the Plan, causing the Plan to pay unreasonable compensation to Retirement Services, and providing the Plan unduly expensive investment options (id. ¶¶ 205–09) (Count VI); and (7) by engaging in prohibited fiduciary self-dealing through the use of proprietary investment options in the Plan and the use of Retirement Services as the Plan's record keeper (id. ¶¶ 211–17) (Count VII). Plaintiffs also seek disgorgement of any ill-gotten gains or profits from the various alleged breaches. Id. ¶¶ 218–26 (Count VIII).

Following Motions to Dismiss the original complaint filed by the Insperity Defendants [Doc. 29] and Reliance [Doc. 32], Plaintiffs filed their Amended Complaint.³ The parties then filed the pending Motions to Dismiss the Amended Complaint. [Docs. 41, 43.]

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a)(2) requires that a pleading contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Under Federal Rule of Civil Procedure 12(b)(6), a claim will be dismissed for failure to state a claim upon which relief can be granted if it does not plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 547, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Supreme Court has explained this standard as follows:

A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully.

Ashcroft v. Iqbal 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal citation omitted). Thus, a claim will survive a motion to dismiss only if the factual allegations in the pleading are "enough to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955.

At the motion to dismiss stage, the court accepts all the well-pleaded facts in the plaintiff's complaint as true, as well as all reasonable inferences drawn from those facts. McGinley v. Houston , 361 F.3d 1328, 1330 (11th Cir. 2004) ; Lotierzo v. Woman's World Med. Ctr., Inc. , 278 F.3d 1180, 1182 (11th Cir. 2002). Not only must the court accept the well-pleaded allegations as true, they must be construed in the light most favorable to the pleader. Powell v. Thomas , 643 F.3d 1300, 1302 (11th Cir. 2011). But the court need not accept legal conclusions, nor must it accept as true legal conclusions couched as factual allegations. Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. Thus, evaluation of a motion to dismiss requires the court to assume the veracity of well-pleaded factual allegations and "determine whether they plausibly give rise to an entitlement to relief." Id. at 679, 129 S.Ct. 1937.

III. DISCUSSION

"ERISA is a comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans." Shaw v. Delta Air Lines, Inc. , 463 U.S. 85, 90, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). The statute accomplishes this purpose by imposing fiduciary duties of prudence and loyalty on plan fiduciaries. The duties charged to an ERISA fiduciary are the "highest known to law." ITPE Pension Fund v. Hall , 334 F.3d 1011, 1013 (11th Cir. 2003) (citation omitted). The duty of prudence requires that fiduciaries act "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." 29 U.S.C. § 1104(a)(1)(B). The duty of loyalty requires fiduciaries to act "solely in the interest" of plan participants and beneficiaries and "for the exclusive purpose of providing benefits to participants" and "defraying reasonable expenses of administering the plan." Id. § 1104(a)(1)(A).

As defined by ERISA, "a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its...