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 401 (k) Savings and Investment Plan, Plaintiffs,
ORACLE CORPORATION, ORACLE CORPORATION 401 (K) COMMITTEE, and JOHN DOES 1-20. Defendants.
ORDER OVERRULING OBJECTIONS TO AND ADOPTING
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
E. BLACKBURN UNITED STATES DISTRICT JUDGE.
matters before me are (1) the magistrate judge's
Recommendation Regarding Defendants' Superseding Motion
To Dismiss the Complaint [#63],  filed February 16, 2017; and
(2) Defendants' Objections to Report and Recommendation
[#63] [#65], filed March 2, 2017. I overrule the objections,
approve and adopt the recommendation, and deny the underlying
motion to dismiss.
required by 28 U.S.C. § 636(b), I have reviewed de
novo all portions of the recommendation to which
objections have been filed. I have considered carefully the
recommendation; the objections and the response thereto; the
underlying motion, response, and reply, as well as the
parties' submissions of supplemental authorities; the
complaint to which the motion is directed; and all applicable
clear from both the recommendation and the magistrate
judge's comments to the parties at the hearing on the
motion (see Transcript [#64], filed February 27,
2017),  that he believed this case to be
extraordinarily close and exceptionally context-specific. My
own thorough de novo review of the allegations of
the complaint, the competing arguments, and the conflicting
legal authorities in this area confirms that
characterization, in spades.
general, therefore, caution is indicated. While context is
important in the vetting of any complaint, see Gee v.
Pacheco, 627 F.3d 1178, 1185 (10th Cir.
2010), the Supreme Court specifically has endorsed a
“careful, context-sensitive scrutiny of a
complaint's allegations” in ERISA cases. Fifth
Third Bancorp v. Dudenhoeffer, ___U.S. ___, 134 S.Ct.
2459, 2470, ___ L.Ed.2d ___ (2014). Even the authorities on
which defendants rely in support of their motion to dismiss
suggest caution in proceeding in a case of this nature on a
barren factual record. See, e.g., Tibble v.
Edison International, 729 F.3d 1110, 1135
(9th Cir. 2013) (there are “simply too many
relevant considerations” for a “bright-line
approach to prudence to be tenable”), vacated,
135 S.Ct. 1823 (2015); Hecker v. Deere & Co.,
569 F.3d 708, 711 (7th Cir. 2009) (court's
decision“was tethered closely” to the facts),
cert. denied, 130 S.Ct. 1141 (2010) (emphases in
original). Other federal courts have found likewise. See,
e.g., Tussey v. ABB, Inc., 746 F.3d 327, 336
(8th Cir.), cert. denied, 135 S.Ct. 477
(2014); Lorenz v. Safeway, Inc., 2017 WL 952883 at
*10 (N.D. Cal. March 13, 2017) (slip op.); Board of
Trustees of Southern California IBEW-NECA Defined
Contribution Plan v. Bank of New York Mellon Corp., 2011
WL 6130831 at *3 (S.D.N.Y. Dec. 9, 2011).
those admonitions, the court cannot adopt defendants'
proposal to dismiss Count I of the complaint on the theory
that the plan's fee structure fell within a presumptively
reasonable range of expense ratios. See Lorenz, 2017 WL
952883 at *10 (rejecting approach which “would
effectively carve out a presumption of prudence for expense
ratios that fell within a certain range” and thus
“immunize an investment from scrutiny” based on
that consideration alone). Contrary to defendants'
arguments, the question is not “whether a
revenue-sharing model is within the range of reasonable
choices a fiduciary might make” (Obj. at 10), but
whether this revenue sharing arrangement was
reasonable under all the circumstances. See Hecker,
569 F.3d at 711 (narrow issue court determined, in granting
12(b)(6) motion, was whether “this complaint,
alleging that [the employer] chose this package of
funds . . . failed to state a claim upon which relief can be
granted”) (emphases in original). That determination
must account for all the factors which informed the
fiduciaries' decisionmaking,  not all of which are
presently known to plaintiffs based, allegedly, on their
wrongful failure to disclose such information. (See
Compl. ¶ 59 at 18-19.) See 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
I find the allegations comprising Count II of the complaint
insufficient to state a plausible claim for breach of
fiduciary duty in the selection of particular allegedly
imprudent investments. Although defendants insist this claim
is based impermissibly on nothing more than hindsight,
see Pension Benefit Guaranty Corp. v. Morgan Stanley
Investment Management, Inc., 712 F.3d 705, 718
(2nd Cir. 2013), plaintiffs allege two of the
funds had inadequate performance histories to warrant
investment in them at all (see Compl. ¶ 65 at
21, ¶ 69 at 23; ¶ 71 at 25). See Pension
Benefit Guaranty Corp., 712 F.3d at 719. The third is
alleged to have greatly underperformed its benchmark in four
out of five years before it was removed from the plan.
(Compl. ¶¶ 66-67 at 21-22.) See Lorenz,
2017 WL 952883 at *9. These allegations are sufficient to
suggest a lack of prudence in the selection of the first two
funds and in the retention of the third. See Allen v.
GreatBanc Trust Co., 835 F.3d 670, 678 (7th
Cir. 2016). Moreover, and here again, plaintiffs allege they
were not privy to the process by which defendants selected
investment options, which both explains their inability to
plead with more factual specificity and underscores the
necessity for discovery. (Compl. ¶ 75 at
26-27.) See Braden, 588 F.3d at 596.
arguments for dismissal of Count IV are likewise untenable.
Their suggestion that this claim must fail because the
complaint fails to show the compensation paid to Fidelity was
unreasonable relies on an exemption under ERISA constituting
an affirmative defense which plaintiffs have no burden to
disprove. See Braden, 588 F.3d at 601-03.
Defendants' further argument that revenue sharing
payments are not plan “assets” ignores the plain
language of the statute, which is not so limited.
See 29 U.S.C. § 1106(a)(1)(A) & (C)
(See also supra, n. 6.) Nor is this claim plainly
time-barred, as plaintiffs properly have alleged they did not
have actual knowledge of the allegedly prohibited
transactions. (See Compl. ¶¶ 73-75 at
26-27.) See International Union of Electronic, Electric,
Salaried, Machine and Furniture Workers, AFL-CIO v. Murata
Erie North America, Inc., 980 F.2d 889, 900
(3rd Cir. 1992).
therefore concur with the magistrate judge's conclusion
that the allegations of the complaint are sufficient to state
plausible claims which should not be dismissed at this early
juncture. Moreover, prudential considerations - which the
magistrate judge presciently discussed at the hearing
(see Transcript at 20 [#64], filed February 27,
2017) - further counsel against dismissal in a case as close
as this one. Specifically, this putative class action has now
been pending more than a year. No pretrial deadlines have
been set, pending resolution of the instant motion.
(See Scheduling Order ¶ 9.a. at 15-16 [#40],
filed April 6, 2016.) Because there thus is no deadline to amend
the pleadings, I would be hard-pressed to deny any request to
amend which plaintiffs might make were their present
complaint dismissed. See Fed. R. Civ. P. 15(a)(2).
The only possible basis on which leave to amend might be
denied would be futility,  see Minter v. Prime
Equipment Co., 451 F.3d 1196, 1229 (10th Cir.
2006), but that inquiry would simply return the court to the
fact-intensive, context-specific analysis which makes
dismissal of the instant complaint inappropriate. Such a
tautological exercise is inimical to the overarching purpose
of the Federal Rules of Civil Procedure: the “just,
speedy, and inexpensive determination of every action and
proceeding.” Fed.R.Civ.P. 1.
these reasons, the court approves and adopts the magistrate
judge's recommendation as an order of the court.
Defendants' motion to dismiss accordingly is denied.
IT IS ORDERED as follows:
the objections stated in Defendants' Objections to Report
and Recommendation [#63] [#65], filed March 2, 2017, are
the Recommendation Regarding Defendants' Superseding
Motion To Dismiss the Complaint [#63], filed February 27,
2017, is approved and adopted as an order of this court; and
Defendants' Superseding Motion To Dismiss the Complaint