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Short v. Brown University

United States District Court, D. Rhode Island

July 11, 2018

DIANE G. SHORT; SAMIRA PARDANANI; JUDITH DAVIAU; and JOSEPH BARBOZA, Individually and as Representatives of a Class of Participants and Beneficiaries in and on Behalf of the BROWN UNIVERSITY DEFERRED VESTING RETIREMENT PLAN, and the BROWN UNIVERSITY LEGACY RETIREMENT PLAN, Plaintiffs,
BROWN UNIVERSITY in Providence in the State of Rhode Island and Providence Plantations, Defendant.


          William E. Smith Chief Judge

         I. Introduction

         This case is one of many, look-alike lawsuits filed nationwide by current and former members of faculty and staff of private (mainly elite) universities in which it is alleged that the universities imprudently managed retirement accounts to the detriment of their employee-plan participants. Plaintiffs Diane G. Short, Samira Pardanani, Judith Daviau, and Joseph Barboza (collectively, “Plaintiffs”), eligible faculty and staff at Defendant Brown University (“Brown” or “Defendant”), and vested participants in one of Brown's two retirement plans, sue individually and as representatives of a class of participants and beneficiaries of the Brown University Deferred Vesting Retirement Plan (“Deferred Vesting Plan”) and the Brown University Legacy Retirement Plan (“Legacy Plan”) (collectively, “Plans”). Plaintiffs suggest they were short-changed by Brown in saving for their retirement. More precisely, Plaintiffs allege that Brown, as the Plans' named fiduciary and plan administrator, has breached its duties of prudence and loyalty contra to the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461. Brown moves to dismiss (ECF No. 21), suggesting Plaintiffs have not overcome the pleading standard of Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the below reasons, Brown's Motion is granted in part and denied in part.

         II. Background[1]

         Plaintiffs, plan-participants, bring this action, individually and on behalf of a class of participants and beneficiaries of the Plans, under 29 U.S.C. § 1132(a)(2) and (3). (Compl. ¶ 1, ECF No. 1.) Brown's Plans are defined contribution, individual account, employee pension benefits plans, defined under 29 U.S.C. § 1002(2)(A) and § 1002(34). (Id. ¶ 11.) The Plans, under which eligible faculty and staff members at Brown may participate, provide the principal source of retirement income for Brown's employees and are premised on deferrals of employee compensation and employer matching contributions. (Id. ¶ 13.)

         With assets above $1 billion as of December 31, 2015, the Legacy Plan constitutes a “Mega” plan. (Id. ¶¶ 14-15.) That Plan had 6, 325 participants as of December 31, 2014, and a year later it had 4, 535 participants. (Id. ¶ 15.) With more than $244 million in assets as of December 31, 2015, 8, 054 participants as of December 31, 2014, and 9, 594 participants one year later, the Deferred Vesting Plan qualifies as a “Large” plan. (Id. ¶¶ 14-15.) Brown, as the “Plan Administrator under 29 U.S.C. § 1002(16)(A)(i), ” and a named fiduciary pursuant to section 402(a)(1) of ERISA, “is responsible for day-to-day plan operations.” (Id. ¶ 21.) Specifically, as Plan Administrator, Brown:

is vested with exclusive and complete responsibility and discretionary authority to control the operation, management and administration of the Plans, with all powers necessary to enable it properly to carry out such responsibilities, including the selection and compensation of the providers of administrative services to the Plans and the selection, monitoring, and removal of the investment options made available to participants for the investment of their contributions and provision of their retirement income.

(Id. ¶ 22.) For similar reasons, Brown is a fiduciary to the Plans because it maintains discretionary authority and/or control with respect to the Plans' management, management and disposition of Plan assets, and discretionary authority or responsibility in the Plans' administration. (Id. ¶ 23.) Brown's Plans are known as 403(b) retirement plans.[2]

         Plaintiffs allege that Brown failed to fulfill its fiduciary duties pursuant to ERISA. For example, according to Plaintiffs, on or before December 31, 2014, the Legacy Plan “offered a bewildering array of 175 investment options through Fidelity Investments and offered an additional 24 investment options through TIAA-CREF, which included numerous duplicative investment choices (e.g., 9 target retirement date funds offered by Fidelity Investments and 9 target retirement date funds offered by TIAA CREF).” (Id. ¶ 7(a).) As of December 31, 2015, the Legacy Plan offered 35 investment options through TIAA-CREF and 26 through Fidelity Investments; those options continued to include duplicative investment choices. (Id. ¶ 7(b).) On or before December 31, 2014, similarly, the Deferred Vesting Plan “offered a bewildering array of 177 investment options through Fidelity Investments and offered an additional 26 investment options through TIAA-CREF.” (Id. ¶ 7(c).) As of that date, the Deferred Vesting Plan also included many duplicative investment choices “and dozens of highly specialized funds that lack diversification and inappropriate for inclusion in a menu of investment choices in a participant-directed individual account plan.” (Id.) As of December 31, 2015, at least 35 investment options were offered through TIAA-CREF whereas Fidelity Investments offered at least 26, which included duplicative choices. (Id. ¶ 7(d).) Specifically, both Plans offered the TIAA Traditional Annuity, “a fixed annuity contract that returns a contractually specified minimum interest rate.”[3] (Id. ¶ 29.) The Plans also offered “variable annuities that invest in underlying securities for a given investment style, ” including the “CREF Stock Account, CREF Money Market Account, CREF Inflation-Linked Bond Account, CREF Social Choice Account, CREF Bond Market Account, CREF Global Equities Account, CREF Growth Account, and CREF Equity Index Account.” (Id. ¶ 31.) These annuities' value fluctuated based on investment performance and the accounts' expenses. (Id.) Similarly offered was the TIAA Real Estate Account, a TIAA-CREF maintained, insurance company separate account, i.e., “an investment vehicle that aggregates assets from more than one retirement plan for a given investment strategy, but those assets are segregated from the insurance company's general account assets.” (Id. ¶ 33.) What remains for the Plans' investment options are various TIAA-CREF mutual funds, which “charge varying amounts for investment management, but also charge distribution, marketing, and other expenses, depending on the type of investment and share class.” (Id. ¶ 34.)

         III. Legal Standard

         To overcome a motion to dismiss under Rule 12(b)(6), a complaint must possess sufficient facts “to state a claim for relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “The court must take all of the pleaded factual allegations in the complaint as true, ” Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014), and draw all reasonable inferences in favor of the plaintiff. Riggs v. Curran, 863 F.3d 6, 10 (1st Cir. 2017). “Barring ‘narrow exceptions,' courts tasked with this feat usually consider only the complaint, documents attached to it, and documents expressly incorporated into it.” Foley, 772 F.3d at 71-72 (quoting Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993)). “[A] primary purpose of a Rule 12(b)(6) motion is to weed out cases that . . . based on the factual scenario on which the case rests, the plaintiff could never win.” Id. at 72. “[P]laintiffs are not required to submit evidence to defeat a Rule 12(b)(6) motion, but need only sufficiently allege in their complaint a plausible claim.” Id.

         Further, at the motion-to-dismiss stage, “further record development - and particularly input from those with expertise in the arcane area of the law where ERISA's . . . provisions intersect with its fiduciary duty requirements . . . [is] essential to a reasoned elaboration of that which constitutes a breach of fiduciary duty in this context.” LaLonde v. Textron, Inc., 369 F.3d 1, 6 (1st Cir. 2004). “In factually complex ERISA cases like the instant ones, dismissal is often inappropriate.” Brotherston v. Putnam Invs., No. 15-13825-WGY, 2016 WL 1397427, at *1 (D. Mass. 2016); see also Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009) (“No matter how clever or diligent, ERISA plaintiffs generally lack the inside information necessary to make out their claims in detail unless and until discovery commences.”).

         IV. Discussion

         At the outset, because Plaintiffs expressly concede that Counts III and IV do not survive Brown's Motion for lack of standing, the Court dismisses those Counts. (See Pls.' Opp'n to Mot. to Dismiss (“Pls.' Opp'n”) 1 n.2 (“Plaintiffs do not oppose dismissal of Counts III and IV . . . as Plaintiffs were not borrowers under this loan program.”)). The Court's discussion is therefore limited to Counts I and II. As to these ...

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