In re Citigroup Erisa Litigation
104 F. Supp. 3d 599
S.D.N.Y.2015Background
- The Citigroup 401(k) Plan and Citibuilder 401(k) Plan required a Citigroup Common Stock Fund as an investment option; participants chose allocations among available funds and received some employer matching in Citi stock.
- Plaintiffs are plan participants who allege fiduciary breaches by Citigroup, Citibank, the Plan Administration Committee, the Investment Committee, and individual directors/officers based on Citigroup’s precipitous stock decline during the 2008–2009 financial crisis (class period Jan. 16, 2008–Mar. 5, 2009).
- Plaintiffs assert five ERISA claims: imprudence and disloyalty based on public information (Count I), imprudence based on nonpublic information (Count II), failure to monitor (Count III), failure to disclose to co‑fiduciaries (Count IV), and co‑fiduciary liability (Count V).
- Defendants moved to dismiss under Rule 12(b)(6), arguing (1) the claims are time‑barred by ERISA’s statute of limitations and (2) plaintiffs fail to plead viable fiduciary breaches given plan terms and controlling ERISA standards for ESOPs/stock funds.
- The court dismissed the complaint in full: (a) claims were time‑barred because plaintiffs had actual knowledge of the material facts before the 3‑year bar date; (b) only the Administration and Investment Committees were fiduciaries for plan‑management purposes; (c) Dudenhoeffer forecloses liability based on public information absent special circumstances; (d) plaintiffs did not plead material nonpublic facts or any viable derivative monitoring/co‑fiduciary claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness under 29 U.S.C. § 1113 | Claims relate to losses and public warnings before Dec. 8, 2008; tolling awaited Citi I appeal | Plaintiffs had actual knowledge of material facts more than 3 years before filing; action is time‑barred | Dismissed as untimely: plaintiffs had or should have had actual knowledge before the 3‑year cutoff |
| Who is an ERISA fiduciary | Citigroup and Citibank exercised control and retained duties, making them de facto fiduciaries | Only Administration and Investment Committees had plan‑management discretion | Only Administration and Investment Committees are fiduciaries; claims against others dismissed |
| Duty of prudence based on public information | Public (and internal) warnings made Citi stock imprudent; fiduciaries should have stopped purchases/divested | Dudenhoeffer: fiduciaries may rely on public market price; allegations of risk alone are implausible without special circumstances | Duty‑of‑prudence claims based on public information dismissed under Dudenhoeffer |
| Duty of prudence based on nonpublic information & co‑fiduciary/monitoring claims | Fiduciaries had undisclosed nonpublic information and failed to disclose/monitor | Plaintiffs did not plead any material nonpublic facts or antecedent breach necessary for monitoring/co‑fiduciary liability | Nonpublic‑information, monitoring, disclosure, and co‑fiduciary claims dismissed for failure to plead material facts or an underlying breach |
Key Cases Cited
- McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184 (2d Cir. 2007) (Rule 12(b)(6) pleading standards and inferences)
- Pegram v. Herdich, 530 U.S. 211 (1999) (ERISA fiduciary function threshold; same actor may wear different hats)
- Caputo v. Pfizer, Inc., 267 F.3d 181 (2d Cir. 2001) (definition of "actual knowledge" for ERISA § 1113)
- Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995) (presumption of prudence for ESOP fiduciaries — discussed and limited by later authority)
- Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (2014) (ESOP fiduciaries not entitled to a presumption of prudence; claims based solely on public information implausible absent special circumstances)
- Coulter v. Morgan Stanley & Co., Inc., 753 F.3d 361 (2d Cir. 2014) (distinguishing settlor functions and fiduciary conduct; limits on when corporate decisions constitute fiduciary acts)
- Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (2011) (materiality standard for nondisclosure claims: change to the total mix of information)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions not presumed true on motion to dismiss)