Adedipe v. U.S. Bank, National Ass'n
62 F. Supp. 3d 879
D. Minnesota2014Background
- Plaintiffs are vested participants in U.S. Bancorp’s defined‑benefit pension Plan who sued as a putative class under ERISA alleging fiduciary breaches and prohibited transactions from Sept. 30, 2007–Dec. 2010. Defendants: U.S. Bancorp, U.S. Bank (trustee), FAF Advisors (investment manager), Nuveen (acquired FAF assets in 2010), Board and Committee members.
- Plaintiffs’ core allegations: (1) a long‑standing “100% Equities Strategy” that left the Plan fully invested in equities and caused large losses in the 2008 market crash; (2) investment of up to ~40% of Plan assets in FAF’s affiliated mutual funds to benefit FAF (self‑dealing); and (3) losses from a securities‑lending program in which cash collateral was invested in Mount Vernon portfolios that collapsed in 2008.
- Relief sought: restitution to the Plan for losses, disgorgement of fiduciary profits, constructive trust, removal of fiduciaries, and injunctions requiring diversification/monitoring.
- Procedural posture: Nuveen moved to dismiss; U.S. Bank Defendants moved to dismiss or for summary judgment; Plaintiffs sought Rule 56(d) discovery relief. Court granted parts of Defendants’ motions and denied Plaintiffs’ 56(d) request.
- Key factual / contractual findings: the CAC pleads the 100% strategy was in place by 2004; the Investment Management Agreement authorized FAF to invest in Affiliated Funds with Compensation Committee approval; Nuveen’s APA explicitly carved out liabilities relating to seller plans, so Nuveen did not assume FAF’s plan liabilities; the Plan executed a broad Settlement and Release regarding the securities‑lending program on the filing date, releasing related claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Constitutional standing to sue on behalf of the Plan | Plaintiffs (participants) alleged Plan lost $1.1B in 2008, became underfunded, increasing risk to their accrued benefits | Defendants argued plan sponsor and PBGC protections (and AFTAP measure) show no individualized injury | Court: Plaintiffs have Article III standing — alleged underfunding (by actuarial valuation/minimum‑funding metrics), causation, and redressability are sufficient at pleading stage |
| Timeliness of claims re: 100% Equities Strategy (ERISA §1113) | Plaintiffs argued continuing violations/purchases extended violations into limitations period | Defendants argued strategy adopted by 2004, so six‑year limitations barred claims filed in 2013 | Held: Claims based on maintaining/adopting 100% strategy accrued in 2004 and are time‑barred; continuing‑violation theory rejected because complaint challenges the strategy itself, not discrete later transactions |
| Sufficiency of allegations re: imprudence/failure to rebalance after 2007 market deterioration | Plaintiffs argued fiduciaries should have reallocated after late‑2007 signs of volatility and correlation increases | Defendants said allegations are conclusory and do not plausibly show imprudence under Twombly/Iqbal | Held: Even assuming limitations issue avoided, allegations of market warning signs alone are insufficiently specific to state a plausible imprudence claim; those portions dismissed |
| Affiliated Funds (self‑dealing) — timeliness, contract, and ERISA claims | Plaintiffs alleged FAF and Committee funneled Plan assets into FAF mutual funds during 2007–2011 to prop up FAF, producing management fees; some purchases occurred within limitations period | Defendants argued (a) earlier investments predate limitations period, and (b) the IMA authorized investment in Affiliated Funds consistent with Investment Policy | Held: Purchases of FAF funds during limitations period render those claims timely; IMA expressly authorized Affiliated Fund investments consistent with policy, so contract‑based theory fails, but independent ERISA conflict/self‑dealing allegations survive against U.S. Bank and others (not Nuveen) |
| Nuveen’s liability as FAF successor | Plaintiffs sued Nuveen as successor in interest to FAF | Nuveen pointed to APA’s express carve‑out excluding liabilities “under or with respect to any Seller Plans” (Seller Plans include the pension plan because of common‑control language) | Held: APA unambiguous under Delaware law; Nuveen did not assume FAF’s liabilities related to the Plan — Nuveen dismissed |
| Securities‑lending claims and release | Plaintiffs alleged losses from Mount Vernon bond portfolio and fraudulent conduct by FAF personnel; sought to pursue Plan‑level claims | Defendants produced Plan’s Sept. 30, 2013 Settlement & Release (same day suit filed) releasing “any and all claims … arising out of or otherwise relating to [the Plan’s] participation in [U.S. Bank’s] securities lending program,” covering Plan and those who could claim through it | Held: Release is clear and unambiguous under Minnesota law and extinguishes the securities‑lending claims; Plaintiffs’ Rule 56(d) request to delay summary judgment was denied as speculative and insufficient |
Key Cases Cited
- Lexmark Intern., Inc. v. Static Control Components, 134 S. Ct. 1377 (U.S. 2014) (statutory standing requires assessing whether Congress provided a cause of action for the asserted injury)
- Harley v. Minnesota Mining & Mfg. Co., 284 F.3d 901 (8th Cir. 2002) (participant lacks standing under §1132(a)(2) when plan retains surplus sufficient to absorb loss; surplus analysis governs injury inquiry)
- LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (U.S. 2008) (relief under §1109 enures to the plan; §1132(a)(2) remedies plan injuries)
- Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (U.S. 1999) (defined‑benefit participants have no claim to particular plan assets; entitlement is to defined benefits)
- Braden v. Wal‑Mart Stores, 588 F.3d 585 (8th Cir. 2009) (Article III standing required for each claim a participant seeks to press on behalf of the plan)