Stargel v. Suntrust Banks, Inc.

• Decision Date: 07 August 2013
• Docket Number: Civil Action No. 1:12–CV–3822–ODE.
• Citation: 968 F.Supp.2d 1215
• Parties: Sandra D. STARGEL, Selethia Pruitt, and all others similarly situated, Plaintiffs, v. SUNTRUST BANKS, INC.; The Suntrust Banks, Inc. Benefits Plan Committee; Ridgeworth Capital Management, Inc.; Jorge Arrieta; Harold Bitler; Mimi Breeden; Mark Chancy; Alston D. Correll; David Dierker; Ted Hoepner; Ken Houghton; Thomas Kuntz; Donna Lange; Joseph L. Lanier, Jr.; Jerome Lienhard; Gregory Miller; Thomas Panther; William O'Halloran; Larry L. Prince; William H. Rogers, Jr.; Christopher Shults; John Spiegel; Mary Steele; John and Jane Does 1 TO 20; Aleem Gillani; and The Suntrust Banks, Inc. Benefits Finance Committee, Defendants.
• Court: U.S. District Court — Northern District of Georgia

968 F.Supp.2d 1215

Sandra D. STARGEL, Selethia Pruitt, and all others similarly situated, Plaintiffs,

v.SUNTRUST BANKS, INC.; The Suntrust Banks, Inc. Benefits Plan Committee; Ridgeworth Capital Management, Inc.; Jorge Arrieta; Harold Bitler; Mimi Breeden; Mark Chancy; Alston D. Correll; David Dierker; Ted Hoepner; Ken Houghton; Thomas Kuntz; Donna Lange; Joseph L. Lanier, Jr.; Jerome Lienhard; Gregory Miller; Thomas Panther; William O'Halloran; Larry L. Prince; William H. Rogers, Jr.; Christopher Shults; John Spiegel; Mary Steele; John and Jane Does 1 TO 20; Aleem Gillani; and The Suntrust Banks, Inc. Benefits Finance Committee, Defendants.

Civil Action No. 1:12–CV–3822–ODE.

United States District Court,

N.D. Georgia,

Atlanta Division.

Aug. 7, 2013.

Alan R. Perry, Jr., Page Perry LLC, Atlanta, GA, J. Brian McTigue, James A. Moore, McTigue Law, LLP, Washington, DC, for Plaintiffs.

Darren A. Shuler, David Tetrick, Jr., Michael Benjamin Wakefield, King & Spalding, LLP, Atlanta, GA, for Defendants.

ORDER

ORINDA D. EVANS, District Judge.

This putative class action alleging violations of the Employment Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (“ERISA”), is currently before the Court on Defendants' Motion for Partial Summary Judgment [Doc. 12], and Defendants' Motion to Dismiss Amended Complaint [Doc. 18]. For the reasons set forth below Defendants' Motion for Partial Summary Judgment [Doc. 12] is GRANTED, and Defendants' Motion to Dismiss Amended Complaint [Doc. 18] is GRANTED.

I. General Background

On October 31, 2012, Sandra D. Stargel (“Stargel”) and Selethia Pruitt (“Pruitt”) (collectively “Plaintiffs”) filed a Complaint in this Court against Defendants [Doc. 1].¹ On February 19, 2013, Plaintiffs filed an Amended Complaint [Doc. 16]. The Amended Complaint states:

This is a civil enforcement action brought pursuant to [ERISA], 29 U.S.C. § 1132(a)(2) & (a)(3), for violations of ERISA's fiduciary duty and prohibited transactions provisions. It is brought as a class action by [Plaintiffs], participants in the SunTrust Banks, Inc. 401(k) Plan ... on behalf of the 401(k) Plan and all similarly situated Plan participants and beneficiaries ..., and all predecessor plans.

[Doc. 16 ¶ 1].

The Amended Complaint and certain documents described below ² show the following: SunTrust Banks, Inc. (“SunTrust”) maintains a § 401(k) investment program for its employees [Doc. 16 ¶ 61]. Under § 401(k) of the Internal Revenue Code, investments have tax advantaged status. Employees contribute via payroll deduction the amounts they wish to invest and select investments from a menu of choices. The terms of the program are set out in a written plan (“Plan”). The Plan is an employee stock ownership plan designed for investment primarily in company stock. At relevant times the Plan offered a variety of investment vehicles, including: shares in the SunTrust Common Stock Fund, unitized shares in eight proprietary mutual funds called the STI Classic Funds, and also certain offerings unaffiliated with SunTrust, namely the Bernstein International Portfolio Fund (“SIMTX”), the Dreyfus Premier Small Cap Value Fund (“DSVRX”), the Lazard Mid Cap Core Fund (“LZMIX”), and the Dodge & Cox Balanced Fund (“DODBX”) [ see Doc. 16 ¶ 41; Doc. 18–5 at 11–13]. Employees had their choice of investing in any one or more of them. Plaintiffs' Amended Complaint focuses on the eight proprietary mutual funds known as the STI Classic Funds.³ Seven of these funds were first offered in or before 2002, well outside ERISA's six year period of limitations even when applicable tolling periods are factored in [ see supra note 1].

SunTrust is the Plan sponsor and is a named fiduciary in the Plan [ Id. ¶ 18]. The SunTrust Inc. Benefits Plan Committee and the SunTrust Banks Inc. Benefits Finance Committee and their respective members (the individual Defendants) (the “Committee Defendants”) are named fiduciaries of the Plan who had responsibility for selecting investment options for the Plan.⁴ Both of the committees and their individual members are collectively called the Committee Defendants in the Amended Complaint. According to the Amended Complaint, Defendant RidgeWorth Capital Management, Inc. (“RidgeWorth”) is “a SunTrust subsidiary and an investment advisor registered with the SEC” [ Id. ¶ 27].⁵ RidgeWorth is the advisor to the STI Classic Funds.

The Amended Complaint alleges that ERISA violations occurred between April 10, 2004 and December 31, 2012 (the designated “Class Period”) [Doc. 16 ¶ 7]. During this time the Committee Defendants failed to remove the STI Classic Funds from the choice of investments. No class has been certified.

According to the Amended Complaint, Plaintiffs Stargel and Pruitt are former employees of SunTrust [ Id. ¶¶ 13, 15]. Stargel was invested in two of the STI Classic Funds beginning by at least April 10, 2004, until December 26, 2007, and in a third fund from 2005 until December 26, 2007, when she left SunTrust's employ [ Id. ¶ 13].⁶ Pruitt invested in two of the STI Classic Funds beginning by at least April 10, 2004, until she retired in October 2010 [ Id. ¶ 15].⁷

The Amended Complaint [Doc. 16] includes the following causes of action: (Count I) the Committee Defendants breached duties of prudence and loyalty by failing to remove or replace the STI Classic Funds as 401(k) Plan investment vehicles, in violation of 29 U.S.C. § 1104; (Count II) the Committee Defendants breached duties of prudence and loyalty by selecting the STI Classic International Equity Index Fund as an investment fund for the 401(k) Plan, in violation of 29 U.S.C. § 1104; and (Count VI) the Committee Defendants engaged in prohibited transactions by causing the 401(k) Plan to invest in the STI Classic Funds, in violation of 29 U.S.C. § 1106 [ id. at 2–3]. The remaining counts of the Amended Complaint–Counts III, IV and V-are derivative claims whose viability depends on the viability of Counts I, II and VI. The derivative claims are discussed later in this Order [ see infra Part III.B.5].

On January 25, 2013, Defendants filed a Motion for Partial Summary Judgment [Doc. 12]. Defendants later filed a Motion to Dismiss Amended Complaint [Doc. 18]. Both Motions have been fully briefed. On July 9, 2013, the Court held a hearing on Defendants' Motion to Dismiss.

II. Motion for Partial Summary Judgment

Defendants' Motion for Partial Summary Judgment argues that all of Plaintiff Stargel's claims in the Amended Complaint are barred by the terms of a Confidential Settlement Agreement and Release (the “Release”) which Stargel executed on June 24, 2010. The Court will address this Motion before turning to Defendants' Motion to Dismiss.

A. Facts

The Affidavit of Clint Efird (Vice President, Total Rewards Analyst, for SunTrust) [Doc. 12–3] sets forth the following facts: Stargel was employed by SunTrust Banks, Inc., its subsidiaries, affiliates, or predecessors, until her employment terminated on November 7, 2007 [ Id. ¶ 6]. During her employment, Stargel participated in the 401(k) Plan [ Id. ¶ 7]. On or about December 26, 2007, Stargel received a lump sum distribution (consisting of her entire account balance) from the Plan [ Id.]. As a result of this final distribution, Stargel's individual Plan account was closed [ Id.]. Stargel has not held any investment in the Plan since she received the final distribution on December 26, 2007 [ Id.]. As a former employee, Stargel is no longer eligible to participate in the Plan [ Id.].⁸

According to the Affidavit of Lori S. Thomas, Senior Employment Counsel for SunTrust [Doc. 12–2]: “On June 24, 2010, Sandra D. Stargel ... entered into a Confidential Settlement Agreement and Release with SunTrust Bank (a wholly owned subsidiary of SunTrust Banks, Inc.) and certain individuals affiliated with SunTrust” [ Id. ¶ 5]. Thomas' Affidavit identifies the Release Stargel signed, and a copy of the Release is attached to the affidavit [Doc. 12–2 at 5–12]. Stargel does not dispute the facts contained in either affidavit or the identification of the Release.

According to the Release itself, it was executed upon settlement of a lawsuit Stargel had filed against SunTrust on November 18, 2007, shortly after her employment ended. The suit sought damages stemming from the alleged commission of certain state law torts.

The Release is lengthy. The pertinent portions are the following:

§ 2.1 As a material inducement for SunTrust and the Individual Defendants to enter into this Agreement, Stargel, for herself and for her heirs, predecessors, successors, representatives, and attorneys, hereby fully, finally, irrevocably, and unconditionally releases and forever discharges SunTrust, the Individual Defendants, and all of the other Released Parties ⁹ of and from all Claims ¹⁰ that Stargel now has, may have had, or may hereafter claim to have, arising out of, related to, or connected with, in any way, acts, events, or facts done or occurring from the beginning of time through the Effective Date,¹¹ including, without limitation:

§ 2.1.1 [c]laims under ... the Employee Retirement Income Security Act (29 U.S.C. § 1001 et seq.) [;] ... [and]

§ 2.1.3 [c]laims under any SunTrust employee benefit plan, other than Claims related to Stargel's entitlement to receive any vested benefits earned under any such plan....

§ 2.2 Stargel acknowledges and agrees that this Release shall be interpreted in the broadest possible manner in favor of SunTrust, the Individual Defendants, and all of the other Released Parties.

§ 2.3 Stargel covenants, warrants, and agrees that she will not institute, encourage, or join in as a class member or otherwise, any administrative, arbitration, equitable, legal, or other proceeding against SunTrust, the Individual Defendants, or any of the other the [sic] Released Parties involving any of the Claims released by this Agreement....

....

§ 2.7 Nothing in this Agreement shall be construed as a waiver of Stargel's right to any...