500 F.Supp.3d 717
N.D. Ill.2020Background
- Plaintiffs are participants in Boeing’s Voluntary Investment Plan (an ESOP "Stock Fund") that held significant Boeing stock; they sued on behalf of a putative class for purchases/holdings during Nov. 7, 2018–Dec. 16, 2019.
- Plaintiffs allege defendants (Boeing officers and Plan committees) had nonpublic knowledge of safety defects in the 737 MAX (MCAS) after the Lion Air crash (Nov. 2018) and before the Ethiopian crash (Mar. 2019).
- Plaintiffs claim defendants breached ERISA fiduciary duties of prudence and monitoring by failing to disclose or otherwise act to protect Plan participants from losses (Counts I–III).
- Defendants moved to dismiss, arguing (1) they were not fiduciaries for the Stock Fund (Newport was the independent fiduciary) and (2) plaintiffs fail to meet the Dudenhoeffer pleading standard for ESOP insider-information claims.
- The court took judicial notice of Plan/contract documents (including the Independent Fiduciary Agreement) and dismissed the Second Amended Complaint without prejudice, allowing a 21‑day opportunity to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fiduciary status over the Stock Fund | Defendants exercised control/oversight making them fiduciaries for the Stock Fund | Independent Fiduciary Agreement delegated exclusive fiduciary authority over Boeing stock to Newport; EBPC only administered the Plan | Not fiduciaries for the Stock Fund; Newport had exclusive fiduciary responsibility, so defendants’ fiduciary claims fail on that basis |
| Duty of prudence (Count I) — insider-information theory | Defendants knew nonpublic MCAS safety problems and should have publicly disclosed or taken other action consistent with securities law to protect the Plan | Plaintiffs fail Dudenhoeffer: they do not plausibly allege an alternative action consistent with securities laws that a prudent fiduciary would view as more likely to help than harm | Dismissed: complaint fails Dudenhoeffer pleading requirement; public disclosure could plausibly have done more harm than good given fast-moving investigations |
| Failure to monitor (Count II) | Defendants failed to monitor the Plan’s investment in Boeing stock and act upon knowledge of imprudence | Same Dudenhoeffer-based defense and fiduciary-status argument | Dismissed: claim fails because plaintiffs do not satisfy Dudenhoeffer and fiduciary status problems remain |
| Co‑fiduciary liability (Count III) | Defendants are liable for breaches by co‑fiduciaries or for failing to remedy breaches | Under ERISA co‑fiduciary liability is derivative of primary fiduciary breach; no underlying breach properly pled | Dismissed as derivative of Counts I–II which fail |
Key Cases Cited
- Pegram v. Hedrich, 530 U.S. 211 (addressing threshold question whether a defendant was acting as an ERISA fiduciary)
- Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (establishing pleading standard for ESOP fiduciary claims based on insider information)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility pleading standard under Rule 12(b)(6))
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must present a plausible claim)
- Amgen Inc. v. Harris, 136 S. Ct. 758 (discussing application of Dudenhoeffer standard in ERISA/ESOP context)
- Hecker v. Deere & Co., 556 F.3d 575 (judicial notice of plan documents in ERISA cases)
- Rinehart v. Lehman Bros. Holdings Inc., 817 F.3d 56 (post‑Dudenhoeffer circuit decision rejecting public disclosure alternative)
- Jander v. Retirement Plans Comm. of IBM, 910 F.3d 620 (Second Circuit decision noted as an outlier on Dudenhoeffer application)