787 F. Supp. 2d 1226
D. Colo.2011Background
- Plaintiffs allege self-directed IRAs administered by Trustee Defendants lost assets to Bernard Madoff's Ponzi scheme.
- IRA Agreements include explicit exculpatory provisions indemnifying trustees from liability and stating investors bear investment risk.
- Plaintiffs contend fiduciary duties included holding, preserving, and safely segregating trust assets and avoiding commingling.
- Plaintiffs asserted 32 claims across federal common law and state law, including ERISA-based claim 32.
- Court consolidated three related actions; four named Defendants initially included, with some later dismissed.
- Defendants moved to dismiss on multiple grounds including lack of specific against Fiserv, Inc., SLUSA, and ERISA standing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal common law claims should be dismissed | Mandelbaum argues IRA agreements incorporate federal 408 and create federal duties. | Defendants contend no federal common law arises; exculpatory terms preempt state claims. | Federal common law claims dismissed; no private right of action or field preemption. |
| Whether SLUSA precludes state-law class claims | Plaintiffs maintain state claims not within SLUSA or misrepresentations tied to non-covered securities. | SLUSA bars class actions involving misrepresentations in connection with covered securities. | SLUSA preempts and bars the state-law claims on a class-action basis. |
| Whether ERISA claim (Count 32) is viable | Plaintiffs allege breach of fiduciary duty under ERISA through IRA custodians. | IRAs fall outside ERISA; plaintiffs lack standing as ERISA beneficiaries. | ERISA claim dismissed; IRAs not ERISA plans and plaintiffs lack standing. |
| Whether Fiserv, Inc. may be liable | Fiserv, Inc. is parent of subsidiaries and may be liable for their breaches. | No contractual privity or veil-piercing basis; knowledge cannot be imputed to parent. | Fiserv, Inc. dismissed; no factual basis to pierce corporate veil or impute liability. |
| Whether contract and related state claims are time-barred | Plaintiffs opened several IRAs before 2003; limitations may apply. | Statute of limitations applies; some claims untimely absent tolling facts. | Statute of limitations issues deemed fact-intensive; denial of dismissal on timeliness. |
Key Cases Cited
- Atherton v. F.D.I.C., 519 U.S. 213 (1997) (limits federal common law in banking contexts; defer to Congress)
- Boyle v. United Technologies Corp., 487 U.S. 500 (1988) (state law displaced where federal policy requires uniformity)
- Tex. Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630 (1981) (federal law displacement in private rights disputes)
- Allison v. Bank One-Denver, 289 F.3d 1223 (10th Cir. 2002) (upheld indemnity provisions in IRA custodial agreements under four-factor test)
- Rowinski v. Salomon Smith Barney Inc., 398 F.3d 294 (3d Cir. 2005) (four guideposts for SLUSA 'in connection with' analysis)
- Dabit v. Merrill Lynch, 547 U.S. 71 (2006) (SLUSA preemption of certain private securities actions)
- Segal v. Fifth Third Bank, 581 F.3d 305 (6th Cir. 2009) ( SLUSA applies when complaint sounds in misrepresentation despite wording)