129 F. Supp. 3d 4
S.D.N.Y.2015Background
- Plaintiffs (Leber and Kennedy) sued fiduciaries of the Citigroup 401(k) Plan under ERISA § 404 alleging imprudent selection/retention of Citigroup‑affiliated mutual funds that charged excessive fees; prior rounds of briefing left only limited § 404 prudence claims surviving.
- After discovery on timeliness, the Court denied summary judgment on statute‑of‑limitations grounds and permitted further amendment; plaintiffs now seek leave to file a Fourth Amended Complaint (FAC) adding new claims, two new plaintiffs, and new defendants.
- Proposed amendments: (a) revive duty‑of‑loyalty allegations against committee defendants; (b) reassert underperformance‑based prudence claims; (c) add a separate failure‑to‑monitor count; (d) add claims regarding the Stable Value Fund (SVF) and related defendants (Travelers and SVF committee members); (e) add a prohibited‑transaction claim re: brokerage fees; and (f) add plaintiffs Highsmith and Harris and defendants Walter and Zimmerman.
- Defendants opposed with futility and timeliness arguments: loyalty and performance allegations still deficient; SVF and claims by new plaintiffs time‑barred and not relating back; new plaintiffs lack tolling unless class tolling applies.
- The Court granted leave in part: allowed addition of loyalty allegations to Counts 1–3 and addition of Walter, Zimmerman, Highsmith, and Harris; denied addition of underperformance allegations to Counts 1–3, denied a separate monitoring count (but allowed insertion of ¶108 into Count 1), denied SVF claim and prohibited‑transaction brokerage claim as untimely/futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs may add breach of loyalty allegations | Leber alleges specific facts (BPIC minutes, CAM participation, post‑sale stricter monitoring) showing conflicted, self‑interested conduct | Defendants argue prior loyalty allegations were deficient and new facts still insufficient | Court: Granted — new non‑conclusory facts (¶¶55–56) permit plausible inference of disloyalty; add loyalty allegations to Counts 1–3 |
| Whether plaintiffs may reassert underperformance‑based prudence claims | Plaintiffs assert added facts on poor performance at inception and flawed investigation | Defendants say performance allegations still rely on hindsight and fail to show investments were so plainly imprudent | Court: Denied — performance allegations do not plausibly show funds were so obviously imprudent that a prudent fiduciary would have acted differently (futility) |
| Whether SVF‑based claims and new SVF defendants relate back / are timely | Plaintiffs contend discovery revealed key facts and that the claim arises from the same conduct so it relates back | Defendants say the SVF allegations are an entirely distinct factual claim omitted from intervening amended complaints and thus untimely; relation back fails | Court: Denied — SVF claim is based on a distinct set of operative facts not pleaded in the operative complaints and does not relate back under Rule 15(c); claim is time‑barred and futile |
| Whether plaintiffs may add two new named plaintiffs (Highsmith, Harris) | Plaintiffs invoke American Pipe tolling for putative class members; new plaintiffs invested in an affected fund | Defendants argue named plaintiffs lack standing for some funds so tolling inapplicable; claims would be time‑barred | Court: Granted — American Pipe tolling applies here for putative class members; adding Highsmith and Harris allowed (standing/class certification/issues reserved for later) |
Key Cases Cited
- Donovan v. Bierwirth, 680 F.2d 263 (2d Cir. 1982) (fiduciaries must avoid conflicts and act with an eye single to beneficiaries' interests)
- Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705 (2d Cir. 2013) (prudence analyzed based on fiduciary conduct at the time; performance alone insufficient)
- Pegram v. Herdrich, 530 U.S. 211 (2000) (fiduciaries must "wear the fiduciary hat" when making fiduciary decisions)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for non‑conclusory factual allegations)
- Foman v. Davis, 371 U.S. 178 (1962) (standards for granting leave to amend)
- American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974) (class action filing tolls statute of limitations for putative class members)