Veera v. Ambac Plan Administrative Order Committee
769 F. Supp. 2d 223
S.D.N.Y.2011Background
- Ambac Financial Group, Inc. offered an ERISA-governed Savings Incentive Plan allowing investments in Ambac stock; Plan language limited discretion but did not clearly remove fiduciary duties.
- Plaintiff, a former Ambac employee, seeks class-wide recovery for alleged ERISA fiduciary breaches during Oct 1, 2006 to July 2, 2008, when Ambac stock declined sharply and Ambac later filed for Chapter 11 (Nov 8, 2010).
- Plaintiff alleges the Plan Investment and Administrative Committees (Prudence Defendants) continued offering Ambac stock while knowing or should have known of impending decline; Compensation Committee (Monitoring Defendants) allegedly failed to monitor prudence.
- Defendants argue they had no fiduciary duty to remove or diversify Ambac stock because the Plan required its offering; they contend plan documents immunize fiduciaries from ERISA duties.
- Court analyzes whether fiduciary status applies, whether Moench presumption governs, and whether the Plan committees can be sued as fiduciaries; decision denies motion to dismiss.
- Court concludes the pleading plausibly states ERISA fiduciary duties and that the committees may be proper fiduciaries; thus dismissal is denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does ERISA impose fiduciary duties when plan documents require Ambac stock be offered? | Karthikeyan asserts fiduciary duties apply despite plan language. | Veera/Defendants contend no fiduciary duty since plan demanded offering and lacked discretion. | Fiduciary duties may apply despite plan language. |
| Whether Moench presumption bars the claim at dismissal stage | Plaintiff should overcome Moench based on alleged precipitous decline and knowledge of collapse. | Defendants rely on Moench to shield continuing to offer employer stock. | Plaintiff may overcome presumption at this stage; Moench not controlling at dismissal. |
| Is there a duty to disclose or to monitor under ERISA | Alleged failures to disclose or monitor breached ERISA duties. | No affirmative ERISA duty to disclose; monitoring claims are properly pleaded as to failure to monitor. | Duty to disclose not established; failure-to-monitor plausibly pleaded. |
| Are the Plan Committees proper defendants under ERISA | Committees and individual members can be liable as fiduciaries. | Only individuals are liable; committees are not proper defendants. | Committees may be proper ERISA defendants; individual members may bear fiduciary liability. |
Key Cases Cited
- Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559 (1985) (trust documents construed with ERISA policy; documents cannot excuse duties)
- Pegram v. Herdrich, 530 U.S. 211 (2000) (fiduciary duties defined when performing fiduciary function)
- Polaroid ERISA Litig., 362 F. Supp. 2d 461 (S.D.N.Y. 2005) (ERISA fiduciaries must balance documents with ERISA duties; oversight required)
- In re American Express Co. ERISA Litig., 762 F. Supp. 2d 614 (S.D.N.Y. 2010) (plan terms do not automatically remove fiduciary duties; control language scrutinized)
- Morgan Stanley ERISA Litig., 696 F. Supp. 2d 345 (S.D.N.Y. 2009) (discussion of duty to monitor and Moench presumption; at times not controlling on motion to dismiss)
- In re Ford Motor Co. ERISA Litig., 590 F. Supp. 2d 883 (E.D. Mich. 2008) (fiduciary duties and plan documents; liability for decision-making in plan investments)
- In re Enron Corp. Sec., Derivative & ERISA Litig., 284 F. Supp. 2d 511 (S.D. Tex. 2003) (ERISA fiduciaries and committee liability considerations)
- In re Polaroid ERISA Litig., 362 F. Supp. 2d 461 (S.D.N.Y. 2005), 362 F. Supp. 2d 461 (S.D.N.Y. 2005) (see Polaroid above (duplicate entry avoided in final))