Wildman v. Am. Century Servs., LLC

• Decision Date: 27 February 2017
• Docket Number: No. 4:16CV–00737–DGK,4:16CV–00737–DGK
• Citation: 237 F.Supp.3d 902
• Parties: Steve WILDMAN and Jon Borcherding, individually and as representatives of a class of similarly situated persons, and on behalf of the American Century Retirement Plan, Plaintiffs, v. AMERICAN CENTURY SERVICES, LLC, et al., Defendants.
• Court: U.S. District Court — Western District of Missouri

237 F.Supp.3d 902

Steve WILDMAN and Jon Borcherding, individually and as representatives of a class of similarly situated persons, and on behalf of the American Century Retirement Plan, Plaintiffs,

v.AMERICAN CENTURY SERVICES, LLC, et al., Defendants.

No. 4:16CV–00737–DGK

United States District Court, W.D. Missouri, Western Division.

Signed February 27, 2017

Michael F. Brady, Mark A. Kistler, Brady & Associates Law Office, Overland Park, KS, Kai H. Richter, Nichols Kaster PLLP, Carl F. Engstrom, Jacob T. Schutz, Minneapolis, MN, for Plaintiffs.

Samuel J. Rubin, Freshfields Bruckhaus Deringer, New York, NY, W. Perry Brandt, Bryan Cave, LLP, Kansas City, MO, Alison V. Douglass, Dave Rosenberg, James O. Fleckner, Goodwin Procter LLP, Boston, MA, for Defendants.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS

GREG KAYS, CHIEF JUDGE, UNITED STATES DISTRICT COURT

This case involves claims for breach of fiduciary duty brought pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. Plaintiffs Steve Wildman ("Wildman") and Jon Borcherding ("Borcherding"), participants in the American Century Retirement Plan (the "Plan") established by American Century Investment Management, Inc. ("ACIM"), bring this suit, on their own behalf and on behalf of a proposed class of participants in the Plan against Defendants American Century Services, LLC ("ACS"), the American Century Retirement Plan Retirement Committee (the "Committee"), ACIM, American Century Companies, Inc. ("American Century"), and past and present members of the Committee,¹ seeking damages and declaratory and injunctive relief. Plaintiffs claim Defendants breached their fiduciary duties and engaged in prohibited transactions in violation of ERISA.

Now before the Court is Defendants' motion to dismiss (Doc. 34). Defendants argue all of Plaintiffs' claims are either barred by the three-year statute of limitations or fail to state a claim for relief.² For the following reasons, the motion is DENIED.

Background

The amended complaint (Doc. 28) alleges the following:

The Plan covers eligible employees and former employees of American Century and American Century affiliates, ACS and ACIM. Plaintiffs Wildman and Borcherding have participated in the plan since 2005 and 1996, respectively. ACS is the "plan sponsor." ACS together with the Committee are Plan fiduciaries and "administrators" of the Plan. ACIM is an investment advisor for the investments within the Plan. American Century is a plan employer and owns ACS and ACIM.

The Plan is a defined contribution, "401k"³ plan that allows participants to contribute a percentage of their pre-tax earnings and invest those contributions by choosing from "a lineup of options offered by the Plan." Am. Compl. ¶ 21. At retirement, a participant's benefits are generally "limited to the value of their own investment accounts, which is determined by the market performance of the [ ] contributions, less expenses." Id. ¶ 3. Therefore, to maximize benefits for the participants, fiduciaries must consider the investment options offered in the lineup and the fees associated with each of the investment options.

Plaintiffs allege since 2010 the Plan's investment options were "a limited selection of American Century mutual funds, American Century collective investment trusts, and shares of American Century Companies, Inc. Class C common stock." Id. ¶ 22. Plaintiffs estimate the Plan costs were 0.73% in 2010 and 0.65% in 2013. Plaintiffs allege the total plan cost is "extremely high for a defined-contribution plan with a similar amount of assets." Id. ¶ 75. Comparatively, the average plan cost for similar-sized plans was .53% in 2009 (the only data available comparable to 2010), and .44% in 2013.

Plaintiffs allege ACS, ACIM, the Committee, and the Committee members (collectively "Fiduciary Defendants"), improperly managed Plan assets for their own benefit. Specifically, the Fiduciary Defendants breached their fiduciary duties by: (a) using a disloyal and imprudent process to manage the Plan; (b) retaining high-cost proprietary funds in their own self-interest and to the detriment to Plan participants; (c) failing to procure the least expensive available share class for numerous funds; (d) causing the Plan to pay excessive recordkeeping costs; and (e) failing to adequately monitor investments and remove poor performing investments.

Plaintiffs also allege ACS failed to monitor the performance of the Committee and ACIM including monitoring the process used to select, evaluate, and retain the Plan's investment lineup.

Plaintiffs further allege Defendants caused the Plan to engage in prohibited transactions with ACS and ACIM through a revenue sharing agreement between ACS, ACIM, and the Plan. According to the amended complaint, the revenue sharing agreement allowed ACIM to deduct fees from Plan assets for services it provided and paid a portion of those fees to ACS. Plaintiffs allege these payments were for more than reasonable compensation and resulted in significant losses to the Plan participants. Plaintiffs allege Fiduciary Defendants knowingly caused the Plan to engage in these transactions.

Finally, Plaintiffs allege they did not have knowledge of the material facts to support their claims until "shortly before this suit was filed." Id. ¶ 120.

Standard

A complaint "must contain ... a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a). To avoid dismissal, the complaint must include "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "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."

Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Benton v. Merrill Lynch & Co., Inc. , 524 F.3d 866, 870 (8th Cir. 2008).

A court may dismiss a complaint for failure to state a claim if "it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief." Conley v. Gibson , 355 U.S. 41, 45–46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In reviewing the complaint, the court assumes the facts alleged are true and draws all reasonable inferences from those facts in the plaintiff's favor. Monson v. Drug Enf't Admin. , 589 F.3d 952, 961 (8th Cir. 2009).

Discussion

On June 30, 2016, Plaintiffs filed this putative class action on behalf of "all participants and beneficiaries of [the Plan] at any time on or after June 30, 2010, excluding Defendants, employees with responsibility for the Plan's investment or administrative functions, and members of the [American Century] Board of Directors." Am. Compl. ¶ 122. Plaintiffs amended their complaint on September 8, 2016. The amended complaint asserts five causes of action under ERISA.

Count I asserts Fiduciary Defendants breached their duty of loyalty and prudence in violation of 29 U.S.C. § 1104(a)(1)(A)-(B). Count II alleges ACS breached its duty to monitor ACIM, the Committee, and Committee members who allegedly caused losses to the Plan. Counts III and IV allege American Century, ACIM, and ACS engaged in prohibited transactions in violation of 29 U.S.C. § 1106(a)(1) and (b). Count V is a claim for other equitable relief based on ill-gotten proceeds, in violation of 29 U.S.C. § 1132(a)(3).

Defendants argue the amended complaint should be dismissed in its entirety because: (1) the claims are barred by statute of limitations; and (2) Plaintiffs fail to state a claim for relief.

I. Plaintiffs' claims are not barred by the three-year statute of limitations.

Defendants first argue Plaintiffs had actual knowledge of the underlying alleged violation through publicly available records more than three years before bringing this suit, therefore, Counts I, III, and IV are barred under 29 U.S.C. § 1113.

"Bar by a statute of limitations is typically an affirmative defense, which the defendant must plead and prove." Walker v. Barrett , 650 F.3d 1198, 1203 (8th Cir. 2011). Thus, "the possible existence of a statute of limitations defense is not ordinarily a ground for Rule 12(b)(6) dismissal unless the complaint itself establishes the defense." Id.

Under ERISA the limitations period for any breach of fiduciary duty claim is:

(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or

(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation; except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.

29 U.S.C. § 1113 ; see also Brown v. Am. Life Holdings, Inc. , 190 F.3d 856, 858–59 (8th Cir. 1999) (ERISA contains an express statute of limitations barring fiduciary duty claims after the earlier of 6 years from the breach or 3 years from the date plaintiff acquires actual knowledge of the breach). The shorter, three-year statute of limitations requires "a plaintiff have actual knowledge of all material facts necessary to understand that some claim exists." Brown , 190 F.3d at 859 (internal quotation marks omitted). "[I]t is not enough that [the plaintiffs] had notice that something was awry; [the plaintiffs] must have had specific knowledge of the actual breach of duty upon which [they sued]." Caputo v. Pfizer, Inc. , 267 F.3d 181, 193 (...