Pension Benefit Guaranty Corp. Ex Rel. Saint Vincent Catholic Medical Centers Retirement Plan v. Morgan Stanley Investment Management Inc.
712 F.3d 705
| 2d Cir. | 2013Background
- Saint Vincent Catholic Medical Centers Retirement Plan administered by Saint Vincent's; Morgan Stanley Investment Management managed the Plan's fixed‑income portfolio (~35% of assets).
- Plan guidelines aimed to preserve principal with long‑term growth; Citigroup BIG was the benchmark; portfolio was expected to track/exceed it modestly.
- Amended Complaint alleges overexposure to mortgage‑backed securities, including nonagency MBS, and insufficient diversification.
- District Court dismissed under Rule 12(b)(6) for lack of plausible inference Morgan Stanley knew the securities were imprudent; court credited hindsight concerns.
- ERISA duties at issue: prudence (1104(a)(1)(B)), diversification (1104(a)(1)(C)), and compliance with plan documents (1104(a)(1)(D)); plaintiffs had access to plan documents and disclosures but failed to plead direct facts about Morgan Stanley's knowledge/methods.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Prudence standard plausibility | Saint Vincent's asserts MSIM acted imprudently by overconcentrating in high‑risk MBS. | Morgan Stanley contends allegations rely on post hoc conclusions about risk/returns. | Dismissal affirmed for lack of plausible inference of imprudence. |
| Diversification obligation | Saint Vincent's argues the Portfolio's nonagency exposure breached diversification duties. | MSIM contends insufficient facts connect exposure to imprudence. | District Court did not err in finding no plausible diversification breach. |
| Compliance with plan documents | Saint Vincent's claims MSIM violated restrictions in Guidelines and benchmark expectations. | MSIM argues no evidence of specific guideline violations. | No plausible inference of noncompliance with plan documents. |
| Pleading standard under Twombly/Iqbal for ERISA claims | ERISA claims may survive on circumstantial facts; discovery may reveal process flaws. | Higher pleading burden not supportable; need direct methods/knowledge details. | Amended complaint insufficient under standard; claims dismissed. |
Key Cases Cited
- In re Citigroup ERISA Litig., 662 F.3d 128 (2d Cir. 2011) (prudent-man standard; circumstantial evidence must show imprudence under ERISA)
- Braden v. Wal-Mart Stores, Inc., 588 F.3d 585 (8th Cir. 2009) (holistic reading of ERISA complaints; not parsed piece by piece)
- In re Unisys Sav. Plan Litig., 74 F.3d 420 (3d Cir. 1996) (prudence focus on process, not outcomes; no hindsight fault)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 550 U.S. 308 (2007) (context for plausibility and inference in pleading)
- Twombly, 550 U.S. 544 (Supreme Court 2007) (pleading standard; allegations must be plausible, not merely possible)
- Iqbal v. Ashcroft, 556 U.S. 662 (Supreme Court 2009) (two‑prong pleading standard; plausibility required)
- N.J. Carpenters Health Fund v. Royal Bank of Scot. Grp., PLC, 709 F.3d 109 (2d Cir. 2013) (plausibility depends on context; inference must rise above mere possibility)