649 F.Supp.3d 300
N.D. Tex.2022Background
- Legacy Counseling Center offered a 403(b) plan to employees; Peveto Financial Group set up and assisted with employee 403(b) accounts invested in American Funds.
- Plaintiffs Robert Roton and Jacqueline Juarez allege they were not given meaningful opportunity to participate, were excluded in favor of higher-level officers, and that there was no written plan document or universal availability.
- Plaintiffs sued under ERISA: 29 U.S.C. § 1132(a)(1)(B) (to recover benefits/clarify rights) and § 1132(a)(2) (breach of fiduciary duty). They sought benefits, injunctive relief, and related damages.
- Court decisions on motions: Legacy granted summary judgment (safe-harbor exemption from ERISA); Peveto denied summary judgment; Peveto’s Rule 12(c) motion granted in part (dismissed extracontractual damages) and denied in part (standing preserved).
- Expert rulings: Court admitted expert Brett Fry; excluded at trial but preserved report of Kathleen Barrow (treat as amicus-style factual/legal aid). Court also struck Plaintiffs’ jury demand as claims are equitable/restitutionary in nature.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to bring fiduciary-breach claim | Plaintiffs can sue individually for losses from a defined-contribution plan | Peveto: ERISA fiduciary-breach relief is for plan, not individuals (relying on Russell) | Court: Standing exists because LaRue governs defined-contribution plans; deny motion on standing |
| Extracontractual damages (EPCRS corrective earnings; lost opportunity) | Plaintiffs seek IRS corrective earnings and market opportunity losses for missed elective deferrals | Peveto: Those remedies are extracontractual and not recoverable under §1132(a)(1)(B) | Court: Grants dismissal with prejudice for EPCRS calculation and lost opportunity costs as extracontractual remedies |
| Expert Fry (investment loss modeling) | Fry models pre-tax v post-tax portfolios using S&P 500 benchmark and assumed contribution levels | Peveto: Assumptions (max contributions; S&P benchmark) are unreliable/speculative | Court: Denies motion to exclude; methodology reliable enough for admissibility (attacks go to weight) |
| Expert Barrow (ERISA standards, fiduciary conclusions) | Barrow opines Legacy and Peveto were fiduciaries and breached duties; no plan document; universal availability violated | Peveto: Barrow offers legal conclusions and ultimate issues not proper expert testimony | Court: Grants motion to exclude her trial testimony and legal conclusions; denies exclusion of her report and will consider it like an amicus/factual aid |
| Legacy safe-harbor exemption from ERISA | Plaintiffs: safe-harbor not met because Department of Labor Bulletin requires more than one contractor and product | Legacy: Plan satisfied 4 regulatory safe-harbor elements (voluntary; employee-enforceable rights; limited employer involvement; no compensation) | Court: Grants Legacy summary judgment; statute unambiguous that limiting either products or contractors suffices and Legacy provided multiple American Funds product options |
| Peveto fiduciary status and breach (Peveto summary judgment) | Plaintiffs: Peveto exercised discretionary authority, opened accounts, presented enrollment, made investment recommendations, received commissions | Peveto: No discretionary control; only rendered advice and did not breach any fiduciary duty | Held: Denies Peveto summary judgment; genuine disputes of material fact exist on fiduciary status and whether universal-availability duties were breached |
| Jury demand | Plaintiffs seek jury trial for monetary relief | Peveto: Monetary claims are intertwined with equitable remedies so no jury right | Court: Strikes jury demand; remedies are restitutionary/intertwined with equitable claims |
Key Cases Cited
- Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985) (limits fiduciary-breach relief in defined-benefit contexts; emphasized plan-wide remedies)
- LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (2008) (recognized individual recovery for losses in defined-contribution plans)
- Daubert v. Merrell Dow Pharms., 509 U.S. 579 (1993) (district court gatekeeper role for expert admissibility)
- Borst v. Chevron Corp., 36 F.3d 1308 (5th Cir. 1994) (ERISA claims generally do not entitle plaintiffs to jury trial)
- Aetna Health, Inc. v. Davila, 542 U.S. 200 (2004) (ERISA preemption and remedy focus on benefits promised by plan)
- Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) (distinguishing legal and equitable restitution)
- Sereboff v. Mid Atlantic Med. Servs., Inc., 547 U.S. 356 (2006) (ERISA provides equitable remedies to enforce plan terms)
- John Hancock Mut. Life Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86 (1993) (describing fiduciary duties under ERISA)
- Am. Fed'n of Unions Local 102 Health & Welfare Fund v. Equitable Life Assur. Soc. of the U.S., 841 F.2d 658 (5th Cir. 1988) (fee/commission payments do not necessarily create ERISA fiduciary status)