Buffalo Laborers Security Fund v. J.P. Jeanneret Associates, Inc.
818 F. Supp. 2d 697
S.D.N.Y.2011Background
- Hartman and Buffalo Laborers assert ERISA-related claims against Ivy arising from the Madoff Ponzi scheme via JPJA relationships.
- Judge McMahon transferred the cases to this court and partially granted/denied Ivy’s dismissal motions; the transfer was tied to an ERISA consolidation order.
- Ivy moves for partial reconsideration of McMahon’s Order and seeks dismissal of two Hartman claims not raised in Buffalo Laborers.
- Ivy challenges four holdings: Direct Investors fiduciary liability, prohibited transactions, Ivy Committee Defendants liability, and disgorgement claims; seeks dismissal where appropriate.
- Court denies reconsideration for Direct Investors, Committee Defendants, and Disgorgement; grants reconsideration as to Prohibited Transaction Claim; grants dismissal on Count Three and denies Count Eight of Hartman.
- Standard: reconsideration is sparingly granted for intervening law, new evidence, or to correct clear error/imminent injustice; ordinary Rule 12(b)(6) dismissal standards apply to Hartman claims not covered by the McMahon Order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Direct Investors fiduciary liability viability | Direct Investors claims are plausible under ERISA 3(21)(A) and Beacon rationale. | Differences from feeder funds and lack of explicit individualized advice negate plausibility. | Denied; Direct Investor claims remain viable |
| Prohibited transaction claim under ERISA 406(a)(1)(D) | Ivy received inflated fees tied to plan assets; attempt to plead prohibited transaction. | Beacon controls; no knowledge of fraud in 406(a)(1)(D) context. | Granted; dismissed as to Buffalo Laborers and Hartman |
| Ivy Committee Defendants as ERISA fiduciaries | Committees can be proper fiduciaries under ERISA; arguments rely on committee functions described in filings. | Committees are not proper ERISA fiduciaries; decisions inconsistent with precedent and EEOC/other cases. | Denied; claims against Ivy Committee Defendants survive |
| Disgorgement claim under ERISA 502(a)(3) for non-fiduciaries | Disgorgement may be equitable relief for profits traced to plan assets via non-fiduciary participation. | Non-fiduciaries cannot be liable for money damages; relief must be equitable and traceable. | Denied; considered equitable and recoverable under Knudson exception |
| Hartman Count Three (diversification liability) and Count Eight (anti-kickback) | Ivy had control or influence over diversification; § 406(b)(3) applies broadly to fiduciaries receiving fees. | No authority/control over diversification; § 406(b)(3) limited to certain fiduciaries with discretionary authority. | Count Three dismissed; Count Eight survives |
Key Cases Cited
- Beacon Assoc. Litig. v. Ivy Asset Mgmt., 745 F. Supp. 2d 386, 745 F.Supp.2d 386 (S.D.N.Y. 2010) (ERISA fiduciary duty and investment advisor claims; fiduciary status under 3(21)(A))
- Harris Trust & Savings Bank v. John Hancock Mutual Life Ins. Co., 302 F.3d 18 (2d Cir. 2002) (ERISA fiduciary status limited to matters under fiduciary control)
- F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250 (2d Cir. 1987) (extent of fiduciary responsibility bounds liability)
- Mertens v. Hewitt Assocs., 508 U.S. 248 (U.S. 1993) (equitable relief principles; non-fiduciaries may disgorge profits in ERISA)
- Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (U.S. 2002) (equitable relief and tracing in restitution/disgorgement)
- Veera v. Ambac Plan Admin. Comm., 769 F.Supp.2d 223 (S.D.N.Y. 2011) (committee authority for ERISA fiduciary claims; internal committees potential defendants)
- In re Enron Corp. Secs., Derivative & ERISA Litig., 284 F.Supp.2d 511 (S.D. Tex. 2003) (ERISA fiduciary status and committee liability considerations)
- Chao v. Linder, No. 05 Civ. 3812(JBM) (N.D. Ill. 2007) (broad interpretation of ERISA prohibited transactions)