Ruppert v. Principal Life Ins. Co., 4:07–cv–00344–JAJ–TJS.

• Decision Date: 31 March 2010
• Docket Number: No. 4:07–cv–00344–JAJ–TJS.,4:07–cv–00344–JAJ–TJS.
• Citation: 796 F.Supp.2d 959
• Parties: Joseph RUPPERT, as trustee of and on behalf of Fairmount Park, Inc. Retirement Savings Plan, and on behalf of all others similarly situated, Plaintiff, v. PRINCIPAL LIFE INSURANCE CO., Defendant.
• Court: U.S. District Court — Southern District of Iowa

796 F.Supp.2d 959

Joseph RUPPERT, as trustee of and on behalf of Fairmount Park, Inc. Retirement Savings Plan, and on behalf of all others similarly situated, Plaintiff,

v.PRINCIPAL LIFE INSURANCE CO., Defendant.

No. 4:07–cv–00344–JAJ–TJS.

United States District Court,S.D. Iowa,Central Division.

March 31, 2010.

Brent B. Green, Duncan Green Brown & Langeness PC, Des Moines, IA, John A. Libra, Stephen M. Tillery, Korein Tillery LLC, Robert L. King, Korein Tillery, St. Louis, MO, Klint L. Bruno, Chicago, IL, for Plaintiff.

Eric S. Mattson, Joel S. Feldman, Mark B. Blocker, Sidley Austin LLP, Chicago, IL, Brian L. Campbell, Whitfield & Eddy PLC, Des Moines, IA, for Defendant.

ORDER

JOHN A. JARVEY, District Judge.

This matter comes before the Court pursuant to Plaintiff Joseph Ruppert's (“Ruppert”) December 21, 2009 Motion to Set Aside/Reconsider [Dkt. No. 187] the Court's November 5, 2010 order granting judgment on the pleadings on Counts I and II to Defendant Principal Life Insurance Co. (“Principal”). [Dkt. No. 183; Ruppert v. Principal Life Ins. Co., 2009 WL 5667708 (S.D.Iowa Nov. 5, 2009).] Principal responded to Ruppert's motion on January 28, 2010. [Dkt. No. 194.]

On November 25, 2009, the Eighth Circuit Court of Appeals decided Braden v. Wal–Mart Stores, Inc., 588 F.3d 585 (8th Cir.2009). The court in Braden made findings contradictory to this Court's November 5, 2010 order, as to whether revenue sharing is a breach of fiduciary duty and/or a prohibited transaction pursuant to ERISA. Pursuant to Braden, Ruppert asks the Court to vacate its entry of judgment for Principal as it relates to the affiliate or Foundation Options funds. The Court grants Ruppert's motion on Counts I and II and vacates its judgment only as to the Foundation Options mutual funds.

I. Standard of Review

The Federal Rules of Civil Procedure do not provide for motions to reconsider. “Motions to reconsider serve a limited function: to correct manifest errors of law or fact or to present newly discovered evidence.” Hagerman v. Yukon Energy Corp., 839 F.2d 407, 414 (8th Cir.1988) (quotations omitted). A district court may treat a motion for reconsideration “as the ‘functional equivalent of a motion to alter or amend the judgment under Fed.R.Civ.P. 59(e)’ ”. COMSAT Corp. v. St. Paul Fire and Marine Ins. Co., 246 F.3d 1101, 1105 (8th Cir.2001) (quoting DuBose v. Kelly, 187 F.3d 999, 1002 (8th Cir.1999)). In addition to Rule 59(e), the Eighth Circuit has counseled courts to review motions to reconsider under Rule 60(b). Sanders v. Clemco Indus., 862 F.2d 161, 168 (8th Cir.1988); see also Schoffstall v. Henderson, 223 F.3d 818, 827 (8th Cir.2000) (holding that Rule 59(e) applies to a motion to reconsider); Broadway v. Norris, 193 F.3d 987, 989 (8th Cir.1999) (analyzing whether Rule 59(e) or Rule 60(b) applies to a motion to reconsider).

A motion for reconsideration pursuant to Rule 60(b) is “not a vehicle for simple reargument on the merits.” Broadway, 193 F.3d at 990. A movant must demonstrate “exceptional circumstances” to warrant reconsideration. Arnold v. Wood, 238 F.3d 992, 998 (8th Cir.2001) (citing Brooks v. Ferguson–Florissant Sch. Dist., 113 F.3d 903, 904 (8th Cir.1997)). A district court has broad discretion for considering requests for relief from orders, including motions to reconsider. See Jones v. Swanson, 512 F.3d 1045 (8th Cir.2008) (district court has wide discretion in ruling on an order to vacate judgment); Chapa v. United States, 497 F.3d 883 (8th Cir.2007) (abuse of discretion standard for post-trial motions); Minn. Supply Co. v. Raymond Corp., 472 F.3d 524 (8th Cir.2006) (abuse of discretion standard). An abuse of discretion occurs when a judgment “was based on clearly erroneous factual findings or erroneous legal conclusions.” Flannery v. Trans World Airlines, Inc., 160 F.3d 425, 426 (8th Cir.1998) (quoting Mathenia v. Delo, 99 F.3d 1476, 1480 (8th Cir.1996), cert. denied, 521 U.S. 1123, 117 S.Ct. 2518, 138 L.Ed.2d 1020 (1997)). Pursuant to Rule 60(c), a motion must be “made within a reasonable time” after entry of the order to which the motion pertains. Fed.R.Civ.P. 60(c)(1).

In this case, the Court regards the motion to reconsider as a Rule 60(b) motion because Ruppert is requesting relief from an order. The Court has broad discretion to consider relief for “any other reason.” Fed.R.Civ.P. 60(b)(6). The motion was also made within a “reasonable time” after entry of the order and after the Eighth Circuit decision in Braden. Fed.R.Civ.P. 60(c)(1). The Court finds the motion to reconsider ¹ is proper because controlling legal authority in the area of revenue sharing was not available when the Court first ruled upon Principal's motion for judgment on the pleadings.

II. Background of Braden

The Court finds it helpful to review the facts of Braden in determining whether it is proper to reconsider this Court's order. In Braden, Wal–Mart Stores, Inc. (“Wal–Mart”) was the Plan Sponsor for an employee pension benefit plan (“Wal–Mart Plan”) covered by ERISA, 29 U.S.C. § 1002(2)(A). The Wal–Mart Plan established individual profit sharing and 401(k) accounts for each participating employee. Merrill Lynch & Co., Inc. was the Wal–Mart Plan's trustee, holding its assets in trust and providing administrative services. The Wal–Mart Plan had over one million participants by the end of 2007 and close to $10 billion in managed assets. Participants had the option to choose from ten mutual funds, a common/collective trust, Wal–Mart common stock, and a stable value fund. The Wal–Mart Retirement Plans Committee (“RPC”) picked the investment options presented to the participants and was the “entity responsible for the operation, investment policy, and administration of the plan.” Braden, 588 F.3d at 589.

Braden alleged that Wal–Mart and the various individuals in the RPC (collectively, “Plan Fiduciaries”) failed to adequately evaluate the investment options included in the Wal–Mart Plan. Braden's complaint alleged that the process by which the Plan Fiduciaries selected investment options was tainted because “some or all of the investment options” charged excessive fees, perhaps upwards of $60 million in fees over six years (the period included in the complaint). Id. at 590. Braden alleged that the Wal–Mart Fiduciaries selected poor investments and that they failed to consider the impact that revenue sharing from other mutual funds to Merrill Lynch had on the Wal–Mart Plan's investment return. In support of his argument of a reduced return, Braden asserted that the Wal–Mart Plan had “substantial bargaining power” because of its large size and that it inappropriately invested in the markedly more expensive retail shares “generally offered to individual investors” instead of the cheaper institutional shares. Id. Furthermore, Braden alleged that the revenue sharing payments made by other mutual fund companies to Merrill Lynch were not reasonable compensation for services rendered, but “rather were kickbacks paid by the mutual fund companies in exchange for inclusion of their funds in the [Wal–Mart] Plan.” Id. The Wal–Mart Fiduciaries did not disclose the practice of revenue sharing because the “Plan's trust agreement require[d] [the Wal–Mart Fiduciaries] to keep the amounts of the revenue sharing payments confidential.” Id.

As it relates to the practice of revenue sharing, Braden alleged the following in his complaint: Count I, breach of fiduciary duty; Count III, breach of the duty of loyalty by failing to inform participants of Wal–Mart Plan fees and the amounts of “revenue sharing payments made to Merrill Lynch; and Count V, revenue sharing payments are prohibited transactions” pursuant to 29 U.S.C. § 1106(a)(1). Id. The Western District of Missouri District Court dismissed all the claims on the grounds that Braden failed to allege sufficient facts to support his claims. Id. at 590–91.

The Eighth Circuit reversed and remanded because it found that Braden had adequately stated claims for the following: violation of fiduciary duties of prudence and loyalty imposed by ERISA; breach of ERISA imposed fiduciary duties of loyalty and disclosure; and breach of ERISA imposed fiduciary duty barring direct or indirect furnishing of services between the plan and a party in interest. Id. at 598, 600, 602. It is with this background that the Court will examine the decision of the Eighth Circuit in light of Ruppert's motion to reconsider the breach of fiduciary duty and prohibited transaction claims.

III. Pleading Standards in a Rule 12(b)(6) Motion

A. Generally

Braden interpreted Federal Rule of Civil Procedure 8 to mean that a complaint will survive a motion to dismiss under Rule 12(b)(6) if it “contain [s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Braden, 588 F.3d at 594 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007))). Under this plausibility standard, the plaintiff must “show at the pleading stage that success on the merits is more than a ‘sheer possibility’ ”, even if “a savvy judge” could find recovery very unlikely. Id. A court must only find that the complaint's factual content could “allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

In drawing inferences, the court has three duties. First, the court must accept the “plaintiff's factual allegations as true.” Id. Next, the court must identify factual allegations that “require ‘further enhancement’ in order to state a claim.” Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). Finally, the court should construe the complaint as a whole instead of “pars[ing]” pieces “in isolation” to determine if each allegation is plausible. Id. (citing Vila v. Inter–Am. Inv. Corp., 570 F.3d 274, 285 (D.C.Cir.2009)).

B. As Applied to a...