332 F. Supp. 3d 419
D.D.C.2018Background
- Plaintiffs Henderson and Hershenson are beneficiaries of irrevocable trusts for which BNY Mellon served as trustee; both allege BNY Mellon charged excessive, undisclosed fees for trust tax-return preparation performed by PwC.
- From 2007 BNY Mellon contracted with PwC; parties dispute whether PwC performed all tax work and whether PwC was paid on a per‑trust or aggregate basis.
- BNY Mellon historically charged line‑item tax‑preparation fees (typical ranges: $400 grantor; $750 revocable; $750–$950 irrevocable); beginning ~2010–2014 many trusts were moved to bundled fees ("fiduciary" or "advisory"/service fees) that included tax work.
- Plaintiffs seek certification of a class of trusts charged line‑item tax fees where PwC prepared the fiduciary return; plaintiffs allege the line‑item fees exceeded PwC’s per‑trust cost and were undisclosed markups breaching fiduciary duties (duty of loyalty and candor).
- Court held class certification in part: certified a narrowed class limited to trusts that paid specified line‑item tax fees and whose fiduciary returns were prepared by PwC; denied certification as to trusts subject to bundled fees.
- On summary judgment the Court denied summary judgment to both sides as to line‑item fees (factual disputes on markup and retained trustee work), but granted BNY Mellon summary judgment on claims tied to bundled fees (plaintiffs lacked admissible evidence to allocate or prove damages for bundled fees).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Class certification — commonality/typicality/predominance/superiority/adequacy | Class members share common questions: whether BNY Mellon charged markups over PwC, disclosed costs, and breached fiduciary duties; representatives are typical and adequate | Fees and disclosures vary across trusts and years; choice‑of‑law and individualized damages/defenses defeat predominance and typicality | Certification ALLOWED IN PART: class narrowed to trusts that paid specified line‑item tax fees and had PwC prepare the fiduciary return; bundled‑fee trusts excluded |
| Existence of an illegal markup (outsourcing + pricing) for line‑item fees | Contracts and bank documents show per‑account PwC costs far below the charged line‑item fees → undisclosed profit markup | Per‑account figures in contracts reflect year‑end true‑ups from an aggregate volume arrangement; BNY Mellon also retained tax tasks warranting compensation | Summary judgment DENIED to both sides on line‑item fees — material factual disputes (extent of BNY Mellon retained work and meaning of contract pricing) |
| Liability/damages for bundled (fiduciary/advisory/service) fees | Bundled fees rolled in the old tax line‑item fee (expert opinion) so markup persisted despite lack of line item | Bundled fees cover many services; plaintiffs offer no reliable method to allocate tax portion or prove damages | Summary judgment ALLOWED in favor of BNY Mellon for bundled‑fee claims (plaintiffs’ evidence speculative; damages not provable) |
| Affirmative defenses — statute of limitations, ratification/acquiescence, laches | Plaintiffs: discovery rule delays accrual; no disclosure put beneficiaries on notice of alleged markup | BNY Mellon: disclosures/meetings in 2010–2012 put plaintiffs on notice; Hershenson ratified bundled fee; delay caused prejudice | Court DENIED summary judgment for BNY Mellon on these defenses: disclosures were not sufficient as matter of law to start limitations; ratification/acquiescence and laches not established on record (and bundled‑fee issues now out of the case) |
Key Cases Cited
- Smilow v. Sw. Bell Mobile Sys., Inc., 323 F.3d 32 (1st Cir. 2003) (Rule 23(b)(3) prerequisites and superiority discussion)
- Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (U.S.) (plaintiff must affirmatively demonstrate Rule 23 prerequisites)
- Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147 (U.S.) (rigorous analysis required at class certification)
- In re New Motor Vehicles Canadian Exp. Antitrust Litig., 522 F.3d 6 (1st Cir. 2008) (commonality is a low bar)
- Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (U.S. 2016) (representative/statistical proof may be appropriate to establish damages or liability class‑wide)
- Comcast Corp. v. Behrend, 569 U.S. 27 (U.S.) (plaintiff must present a damages model capable of measurement across the class)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S.) (standard for genuine dispute of material fact at summary judgment)
- In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015) (ascertainability requirement for class definitions)
- Matamoros v. Starbucks Corp., 699 F.3d 129 (1st Cir. 2012) (objective criteria for class ascertainability)