United States District Court, D. Colorado
DEBORAH TROUDT, BRAD STAUF, SUSAN CUTSFORTH, WAYNE SELTZER, MICHAEL HARKIN, MIRIAM WAGNER, and MICHAEL FOY, individually and as representatives of a class of plan participants, on behalf of the Oracle Corporation 401k Savings and Investment Plan, Plaintiffs,
ORACLE CORPORATION, ORACLE CORPORATION 401K COMMITTEE, and JOHN DOES 1-20. Defendants.
RECOMMENDATION REGARDING DEFENDANTS' SUPERSEDING
MOTION TO DISMISS THE COMPLAINT
B. Shaffer, United States Magistrate Judge
MATTER comes before the court on Defendants Oracle
Corporation and the Oracle Corporation 401(k) Committee's
Superseding Motion to Dismiss the Complaint (doc. #36),
Plaintiffs' Response to Defendants' Superseding
Motion to Dismiss (doc. #49), and Defendants' Reply in
Support of Superseding Motion to Dismiss (doc. #51). In
addition, each side submitted a Notice of Supplemental
Authorities (doc. ## 55 and 56). The pending motion was
referred to this magistrate judge by Judge Robert E.
Blackburn for a Report and Recommendation. I have reviewed
the briefs submitted by each side and personally read every
case cited by the parties. The court also did its own legal
research to supplement the cases referenced in the
parties' briefs. For the following reasons, I recommend
that Defendants' Superseding Motion be denied.
putative class action commenced on January 22, 2016 with the
filing of the Complaint asserting claims against Oracle
Corporation, the Oracle Corporation 401(k) Committee and John
Does 1-20. The named Plaintiffs are participants in the
Oracle Corporation 401(k) Savings and Investment Plan (the
“Plan”), which is an “employee pension
benefit plan” under 29 U.S.C. § 1002(2)(A) of the
Employee Retirement Income Security Act of 1974 (ERISA). The
Plan, as of December, 2014, purportedly held more than $12
billion in assets and had 65, 732 participants. See
Complaint, at ¶ 11. Oracle Corporation is the named
fiduciary of the Plan under 29 U.S.C. § 1102(a) and the
Plan administrator under 29 U.S.C. § 1002(16)(A).
Id. at ¶ 12. The Oracle Corporation 401(k)
Committee is a named fiduciary under 29 U.S.C. §
1102(a), charged with “(1) the interpretation of the
Plan; (2) the formulation of rules necessary to administer
the Plan; (3) the final determination of participant claims;
and (4) the establishment and implementation of a funding
policy and method for the Plan.” Id. at ¶
13. During the relevant time period, Fidelity Management
Trust Company was the Plan trustee appointed by Oracle and
responsible for providing record keeping and administrative
services to the Plan pursuant to the 2004 Trust
Agreement. Id. at ¶¶ 18 and 19.
parties are familiar with the facts at issue in this case,
only a brief summary of the salient allegations is necessary
to place the pending motion in context. Plaintiffs's
first claim for relief alleges that Defendants breached their
duty of loyalty and prudence by causing the Plan to pay
excessive recordkeeping fees to Fidelity. In support of their
first claim for relief, Plaintiffs allege that Fidelity has
been the record-keeper for the Plan since 1993 and throughout
that period of time, Defendants have not put the Plan's
services out for competitive bids from outside vendors who
charge on a flat per-participant fee basis. See
Complaint, at ¶¶ 51 and 83. According to the
Complaint, “[t]he primary method of payment to Fidelity
for its recordkeeping services for the Plan has been an asset
based fee and not a flat, per-participant fee.”
Id. at ¶ 50. Plaintiffs contend that this
uncapped, asset-based revenue sharing arrangement permitted
Fidelity to receive increased payments as the assets in the
Plan grew, even though the services that Fidelity provided
remained the same. By failing “to prudently monitor and
control Fidelity's total record keeping compensation,
particularly asset-based, uncapped revenue sharing, ”
Defendants alleged caused “losses to the Plan exceeding
$40 million.” Id. at ¶ 63.
second claim for relief alleges Defendants “failed to
engage in a prudent process for the selection and retention
of Plan investment options, ” and instead
“provided and retained more expensive funds with
inferior historical performance that paid revenue sharing and
generated investment management fee revenues for
Fidelity.” Id. at ¶ 89. The Complaint
specifically cites the “consistent underperformance of
the Artisan Small Cap Value Fund” (id. at
¶¶ 66-68), the “dramatic
underperformance” of the Pimco Inflation Response
Multi-Asset Fund (id. at ¶¶ 69-70), and
the “imprudent addition” of the
“underperforming” TCM Small-Mid Cap Growth Fund
(id. at ¶¶ 70-71). In essence, the second
claim contends that Defendants' breach of the duties of
loyalty and prudence by selecting and retaining these funds
“caus[ed] the Plan to lose tens of millions of dollars
of participants' retirement savings.” Id.
at ¶ 89.
third and fourth claims for relief essentially mirror claims
one and two. The third claim asserts that Oracle Corporation
breached its duty to monitor the activities of other
fiduciaries, specifically the 401(k) Committee. The fourth
claim alleges that Defendants violated 29 U.S.C. §
1106(a)(1)(A) by “causing the Plan to engage Fidelity
to be the recordkeeper for unreasonable compensation”
and causing “the Plan to engage in a transaction that
they knew or should have known constituted a direct or
indirect furnishing of services between the Plan and a party
in interest.” Id. at ¶ 100.
essence, “Plaintiffs allege that Defendants breached
their [fiduciary] duty in two primary respects: (1) causing
the Plan to pay unreasonable administrative expenses; and (2)
providing three investment options that consistently
underperformed and did not justify their selection or
retention in the Plan.” See Plaintiffs'
Response to Defendants' Superseding Motion, at p. 9.
moving to dismiss, Defendants insist that Plaintiffs'
first claim for excessive fees and revenue-sharing fails
because revenue-sharing is “perfectly legal” and
because “nothing in ERISA requires fiduciaries to
solicit bids [for record keeping services]” through a
competitive process. Defendants further contend that the
first claim rests on nothing more than implausible conclusory
allegations. Defendants argue that the second claim in
Plaintiffs' Complaint is “predicated entirely, and
impermissibly, on hindsight.” Defendants assert that
“plaintiffs do not allege Defendants selected [the
allegedly underperforming funds] for impermissible
reasons” and that the second claim “is devoid of
any supporting factual allegations sufficient to raise a
plausible inference of misconduct.” Defendants contend
that claim three fails because claims one and two fail to
assert cognizable claims under Rule 12(b)(6). Similarly,
Defendants argue that claim four must be dismissed because
Plaintiffs “have not plausibly alleged Fidelity was
overpaid for recordkeeping or trustee services” and
because “a mutual fund is not a party in
interest.” Defendants further argue that claim four
subsumes transactions that are time-barred. Needless to say,
Plaintiffs take exception to all of the foregoing arguments.
parties are familiar with the prevailing standard of review
under Rule 12(b)(6) of the Federal Rules of Civil Procedure.
Rule 12(b)(6) states that a court may dismiss a complaint for
“failure to state a claim upon which relief can be
granted.” See Fed. R. Civ. P. 12(b)(6). In
deciding a motion under Rule 12(b)(6), the court must
“accept as true all well-pleaded factual allegations .
. . and view these allegations in the light most favorable to
the plaintiff.” Casanova v. Ulibarri,
595 F.3d 1120, 1124-25 (10th Cir. 2010) (quoting Smith v.
United States, 561 F.3d 1090, 1098 (10th Cir. 2009)).
The court's analysis is two-fold.
First, the court identifies “the allegations in the
complaint that are not entitled to the assumption of truth,
” that is those allegations that are legal conclusions,
bare assertions, or merely conclusory. Second, the court
considers the factual allegations “to determine if they
plausibly suggest an entitlement to relief.”
Wood v. Wells Fargo Bank, N.A., No.
13-cv-01731-CMA-KMT, 2013 WL 5763101, at *2 (D. Colo. Oct.
23, 2013) (internal citations omitted).
burden is on the plaintiff to frame ‘a complaint with
enough factual matter (taken as true) to suggest' that he
or she is entitled to relief.” Robbins v.
Oklahoma,519 F.3d 1242, 1247 (10th Cir. 2008). However,
“[t]he issue in resolving a motion to dismiss . . . is
‘not whether [the] plaintiff will ultimately prevail,
but whether the claimant is entitled to offer evidence to
support the claims.” In re YRC Worldwide, Inc.