ORDER
Bеfore the Court is Defendants American Airlines Inc., the Pension Asset Administration Committee, the Benefits Strategy Committee, the Pension Benefits Administration Committee, and the Employee Benefits Committee’s Motion to Dismiss (ECF No. 37). The Motion has been fully briefed and is ripe for review. Having considered the pleadings, briefing, and applicable law, the Court finds that the Motion should be GRANTED in part and DENIED in part.
I. Background
The following background informatiоn is largely taken from Plaintiffs’ Second Amended Complaint (ECF No. 57).
The Plan is an “employee pension benefit plan” as defined by 29 U.S.C. § 1002(2)(A) and is a “defined contribution plan” as defined by 29 U.S.C. § 1002(34). This type' of defined-contribution plan allows employees to invest a percentage of their
Plaintiffs allege that American Airlines is a “plan sponsor” as defined by 29 U.S.C. § 1002(16)(B) and that American Airlines is a subsidiary of Airlines Group, Inc., formerly known as AMR Corp. Plaintiffs also allege that American Airlines was a named-' fiduciary under 29 U.S.C. § 1102(a). Plaintiffs further allege that the Pension Asset Administration Committee (“PAAC”) was named fiduciary under 29 U.S.C. § 1102(a) during much of the relevant time period. Plaintiffs next allege that the Benefits Strategy Committee (“BSC”) was a fiduciary undеr 29 U.S.C. § 1002(21)(A) because it was “responsible for approving material amendments to the Plan, and appointing the members of the PAAC and PBAC.” Second Am. Compl. ¶ 25, ECF No. 57. Plaintiffs allege that the Pension Benefit Administration Committee (“PBAC”) is a fiduciary under 29 U.S.C. § 1002(21)(A) because it was responsible for. the “general operation of the Plan and for the selection of administrative service providers.” Id. ¶26. Plaintiffs also allege that the Employee Benefits Committee
Plaintiffs contend that American Airlines had authority to appoint the Plan’s fiduciaries. American Airlines’ CEO appointed the members of the BSC, who would then appoint the PAAC and the PBAC. According to the Second Amended Complaint, American Airlines had the authority to modify the Plan’s management structure at all times. Under, this authority, American Airlines amended the Plan to give control to the EBC.
The core of Plaintiffs’ claims relate to the use of American Beacon Funds in the Plan. AMR Corp., American Airlines’ parent company, created a line- of mutual funds that were managed by another subsidiary of AMR Corp. This fund manager was later renamed American Beacon. Ad-visors, Iiic. in 2005. These mutual funds were then known as American Beacon Funds.
AMR Corp. sold American Beacon Ad-visors, Inc. in' 2008 to Lighthouse Holdings, Inc. As a part of this deal, AMR Corp. received an equity stake in Lighthouse Holdings, Inc. Plaintiffs contend that this sale was premised on American Airlines continued use of American Beacon Funds in the Plan. Although American Airlines employed an independent third party to approve the continued use of American Beacon Funds in the Plan, Plaintiffs allege that this was done merely to- “whitewash” American Airlines’ actions.
Plaintiffs claim that Defendants breached their fiduciary duties because a prudent fiduciary would not retain the American Beacon Funds because (1) American Beacon Funds were more expensive than similar alternatives; (2) American Beаcon Funds underperformed compared to other similar investments; and (3)- American Beacon Funds were not included in other 401(k) plans. Plaintiffs also allege that Defendants breached their duty of loyalty by not removing the overly expensive and un-derperforming American Beacon Funds.
In 2015, Lighthouse Holdings, Inc. sold its interest in American Beacon Advisors, Inc. According to Plaintiffs, this eliminated any financial interest American Airlines had in the Plan’s use of American Beacon Funds. Then, later in 2015, the Plan’s fiduciaries removed the American Beacon Funds. And shortly thereafter, the Ameri- ■ can Beacon Funds ceased to exist because, according to Plaintiffs, they were marketplace failures that prudent investors would not choose.
Plaintiffs also bring a claim for failure to monitor fiduciaries against American Airlines and the BSC. According to the Plaintiffs, American. Airlines and the BSC were responsible for appointing members of the PBAC, the PAAC, and the EBC, and thus had a duty to monitor the performance of those fiduciaries.
Defendants American Airlines Inc., the Pension Asset Administration Committee, the Benefits Strategy Committee, the Pension Benefits Administration Committee, and the Employee Benefits Committee now bring this Motion, seeking to have all of Plaintiffs’ claims dismissed.
II. Legal Standard
' Federal Rule of Civil Procedure 8(a) requires a claim for relief to contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Rule 8 does not require detailed factual allegations, but “it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal,
To defeat a motion to dismiss pursuant to Rule 12(b)(6), a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Twombly,
In reviewing a Rule 12(b)(6) motion, the Court must accept all well-pleaded facts in the complaint as true and view them in the light most favorable to the plaintiff. Sonnier v. State Farm Mut. Auto. Ins. Co.,
“Generally, a court ruling on a 12(b)(6) motion may rely on the complaint, its proper attachments, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.” Randall D. Wolcott, M.D., P.A. v. Sebelius,
III. Plaintiffs’ Motion to Strike
Defendants request that the Court take judicial notice of Exhibits AAA. See Defs.’ App., ECF No. 39. Plaintiffs move to strike Exhibits D, E, and I through AA. The Fifth Circuit has said that a court may consider:
documents attached to a motion to dismiss that are referred to in the plaintiffs complaint and are central to the plaintiffs claim. We may also consider the contents of relevant public disclоsure documents which (1) are required to be filed with the SEC, and (2) are actually filed with the SEC. Such documents should be considered only for the purpose of determining what statements the documents contain, not to prove the truth of the documents’ contents.
Kopp v. Klein,
IV. Analysis
Plaintiffs contend that Defendants breached their fiduciary duties. Under
A. Defendants’ Arguments for Dismissal of Claims Based on Duty of Loyalty
“ERISA’s duty of loyalty is ‘the highest known to the law.’” Bussian v. RJR Nabisco, Inc.,
Defendants argue that Plaintiffs have failed to set forth a valid theory of disloyalty because (1) an independent third party reviewed and apprоved the continued use of American Beacon Funds after American Beacon Advisors was sold to Lighthouse Holdings, Inc.; (2) Department of Labor regulations allow plan investments managed by the plan sponsor itself; and (3) the Plan did not include all American Beacon Funds and, in fact, not all American Beacon Funds were sold after Lighthouse Holdings, Inc. sold American Beacon Advisors. See Defs.’ Br. 5-9, ECF No. 38.
Defendants argue that the use of an independent third party fiduciary establishes that they faithfully conducted themselves. Id. at 5. Plaintiffs Second Amended Complaint, however, alleges in a concluso-ry manner that the independent party “did not render a truly independent opinion, and was hired with an implicit understanding that its role was to make the agreement look legitimate.” Second Am. Compl. 30 n.3, ECF No. 57. A conclusory statement does not allege facts that would defeat a 12(b)(6) motion.
Plaintiffs do factually allege that the independent fiduciary was not involved after the sale of American Beacon Advis-ors to Lighthouse Holdings, Inc., and so, even if the independent third party did conduct a faithful assessment, Plaintiffs’ allegations that Defendants continued to retain American Beacon Funds after the sale was complete cannot be mitigаted by the use of an independent fiduciary at the time of American Beacon Advisor’s sale. In other words, Plaintiffs argue Defendants would have breached their duty of loyalty by retaining American Beacon Funds after the American Beacon Advisors sale was complete and after the independent fiduciary ceased to be involved. See Pis.’ Br. 12, ECF No. 44. To say at this stage in the litigation that engaging a third party fiduciary establishes that Defendants acted loyally during the entire period of time that Plaintiffs complain of would require the Court to draw an impermissible inference against Plaintiffs. Accordingly, the Court does not find that dismissal is warranted on this basis at this time.
Next, Defendants argue that-because a plan is permitted to invest in options that the plan’s sponsors have a connection to--it makes no sense to infer disloyalty when plans do so. Defs.’ Br. 7, ECF No. 38. While it is true that federal regulations allow such investments, see 42 Fed. Reg. 18734, 18735
Lastly, Defendants argue that American Beacon Funds were included in the Plan on their merits, and they also offer an alternative explanation for why the Plan dropped the American Beacon Funds after Lighthouse Holdings, Inc. sold American Beacon Advisors. Agreeing with Defendants would require the Court to draw inferences against Plaintiffs which is not permitted at this stage. Accordingly, the Court does not believe dismissal is warranted on this basis.
B. Defendants’ Arguments for Dismissal of Claims Based on Duty of Prudence
Defendants argue that none of Plaintiffs’ three imprudence theories can support a valid claim. ERISA requires that fiduciaries act “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” 29 U.S.C. § 1104(a)(1)(B). “[U]nder trust law, a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones.” Tibbie v. Edison Int'l, — U.S. —,
First, Plaintiffs allege that Defendants were imprudent by including American Beacon index funds that were more expensive than nearly identical index fund alternatives. For example, Plaintiffs allege that the Plan included American Beacon S & P 500 Index Fund, which charged fees seven times higher than an identical Vanguard fund.
Second, Plaintiffs allege that'Defendants were imprudent by retaining poor-performing, actively-managed funds, specifically the American Beacon Short-Term Bond Fund, the American Beacon Large-Cap Growth Fund, and thе American Beacon Treasury Inflation Protected Securities Fund. Defendants rely on a number of materials outside the pleadings to argue why the inclusion of these three funds was not imprudent. And while the Court may take judicial notice of those materials, it may not rely on the parties’ opinions about what proper inferences should be drawn from them. “Rule 8 does not require a plaintiff to plead fаcts tending to rebut all possible lawful explanations for a defendant’s conduct.” Braden, 588 F,3d at 596. Accordingly, the Court finds that dismissal is not warranted at this time,
Next, Plaintiffs argue that’ “Defendants breached their duty of prudence by failing to consider low-cost separate accounts and collective trusts as alternatives to mutual funds.” Pls.’ Br. 21, ECF No. 44. Defendants argue that it is riot imprudent to offer mutual funds, instead of separate accounts or collective trusts, in the Plan. Defs.’ Br. 21, ECF No. 38. The Seventh Circuit has held that offering mutual funds instead of other lower cost alternatives is not imprudent. See generally Loomis v. Exelon Corp.,
C. Defendants’ Argument for Dismissal for Failure to Allege Fiduciary Status
Defendants argue that Count I should at least be dismissed as to American Airlines, the PBAC, and the BSC because under ERISA a person is only a fiduciary “to the extent” that he or she was performing a fiduciary function.
In every case charging breach of ERISA fiduciary dirty, then, the threshold question is not whether the actions of: some person employed to provide services under a plan adversely affected a plan benéfíciary’s interest, but whether that person'was acting ¿s a fiduciary (that is, was performing a fiduciary function) when taking the action subject to complaint.
Pegram v. Herdrich,
D. Defendants’ Arguments to Dismiss Failure to Monitor Claim
Defendants also move to dismiss Count II. They argue that the Fifth Circuit has never recognized а duty to monitor claim, and even’if such á claim exists, Plaintiffs have failed to allege sufficient facts to support the claim. In a footnote, the Fifth Circuit stated that it had never recognized a duty to monitor claim. Perez v. Bruister,
(a)Failirig to monitor and evaluate the performance of the Plan’s fiduciaries or have a system in place for doing so, standing idly by as the Plan suffered enormous losses as a result of the other Defendants’ imprudent actions and omissions; , , .
(b) failing to monitor the processes by which Plan investments were evaluated, which would have alerted a prudent fiduсiary to the preferential treatment the Plan’s fiduciaries were giving to American Beacon-affiliated mutual funds in their process of selecting and monitoring the Plan’s investments; the fiduciaries’ failure to investigate the availability of lower-cost separate account and collective trust vehicles; and the failure to investigate in a timely fashion the availability of lower-cost alternativеs to the American Beacon index funds held by the Plan;
(c) failing to remove fiduciaries whose performance was inadequate in that they continued to maintain imprudent, excessively costly, and poorly performing investments within the Plan, all to the detriment of the Plan and Plan participants’ retirement savings.
Second Am. Compl. 60-61, ECF No. 57. This sufficiently alleges a claim. See Urakhchin,
V. Conclusion
For the foregoing reasons, the Defendants’ Motion to Dismiss -is GRANTED to the extent that Count I relies on the claim that Defendants were imprudent for not considering low-cost alternatives to mutual funds, and the Motiqn is DENIED .as to the other claims.
Notes
. Although the Second Amended Complaint was filed after Defendants' Motion to Dismiss, the parties agree that thе Court may consider the Motion without further briefing. See Corrected' Stipulation' Regarding Filing of Second Amended Complaint, ECF No. 56.
. Defendants argue that Vanguard funds were not available to the Plan. Plaintiffs disagree
. The parties should' submit briefing on whether this claim is cognizable in the Fifth Circuit.