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Troudt v. Oracle Corp.

United States District Court, D. Colorado

March 1, 2019

DEBORAH TROUDT, et al., individually and as representatives of a class of plan participants, on behalf of the Oracle Corporation 401k Savings and Investment Plan, Plaintiffs,
ORACLE CORPORATION, et al., Defendants.



         The matters before me are (1) Defendants' Motion for Summary Judgment [#134], [1] filed April 16, 2018; and (2) Plaintiffs' Objections to Untimely Produced Documents Relied on by Defendants in Their Motion for Summary Judgment [#134] [#155], filed May 22, 2018. I overrule the objections. I grant the summary judgment motion in part and deny it in part.[2]


         I have jurisdiction over this matter pursuant to 28 U.S.C. § 1331 (federal question) and 29 U.S.C. § 1132(e)(1) (action to enforce rights under ERISA).


         Summary judgment is proper when there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A dispute is “genuine” if the issue could be resolved in favor of either party. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Farthing v. City of Shawnee, 39 F.3d 1131, 1135 (10th Cir. 1994). A fact is “material” if it might reasonably affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Farthing, 39 F.3d at 1134.

         A party who does not have the burden of proof at trial must show the absence of a genuine factual dispute. Concrete Works, Inc. v. City & County of Denver, 36 F.3d 1513, 1517 (10th Cir. 1994), cert. denied, 115 S.Ct. 1315 (1995). Once the motion has been properly supported, the burden shifts to the nonmovant to show, by tendering depositions, affidavits, and other competent evidence, that summary judgment is not proper. Concrete Works, 36 F.3d at 1518. All the evidence must be viewed in the light most favorable to the party opposing the motion. Simms v. Oklahoma ex rel. Department of Mental Health and Substance Abuse Services, 165 F.3d 1321, 1326 (10th Cir.), cert. denied, 120 S.Ct. 53 (1999).

         III. ANALYSIS

         In this class action, plaintiffs, individually and as representatives of other participants in the Oracle Corporation 401(k) Savings and Investment Plan (the “Plan”), allege defendants breached their fiduciary duties in the management of the Plan, in violation of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §1001 et. seq. The Plan is one of the largest in the country, with more than 65, 000 participants and over $12 billion in assets. As a defined contribution plan, the Plan allows participants to contribute up to 40% of their compensation to the Plan, which Oracle matches. The Plan currently offers some 30 different investment options.

         Defendant Oracle Corporation (“Oracle”) is a named fiduciary of the Plan and a Plan administrator. Defendant Oracle Corporation 401(k) Committee (the “Committee”), composed of Oracle employees (the individually named defendants in this suit), is also a Plan fiduciary. In addition to its other duties, the Committee both monitors the fees paid to Fidelity Management Trust Company (“Fidelity”), the designated recordkeeper and trustee for the Plan, and guides the selection, monitoring, and removal and replacement of Plan investments. Those decisions are informed by an Investment Policy Statement (“IPS”) (see Motion App., Exh. A.4. at 267-273) and assisted by an independent consultant, Mercer Investment Counseling (“Mercer”), which assists the Committee in monitoring and managing the Plan's investment options and costs.[3]

         Before addressing the substance of plaintiffs' claims, I first address their evidentiary objections to certain evidence submitted in support of the summary judgment motion and consider defendants' statute of limitations arguments.

         A. Evidentiary Objections

         Fact discovery in this case closed December 1, 2017. Plaintiffs object to seven documents produced by defendants after that date which are appended to and referenced in the motion for summary judgment. Specifically, these are

(1) A November 30, 2017, email to Peter Shott, Vice President of Human Resources at Oracle Corporation, from Troy Saharic, a consultant with Mercer Investment Counseling (“Mercer”), discussing recordkeeping fees for similar size plan sponsors (Motion App., Exh. C.1. [#134-11] at 8-10);
(2) A February 2, 2018, email from Devon Muir of Mercer to Mr. Shott detailing recordkeeping fees paid by other large Fidelity clients (Motion App., Exh C.2. [#134-11] at 11-13);
(3) A February 8, 2018, email to Mr. Shott from Jim Pujats of Fidelity offering to reduce the per-participant recordkeeping fee from $28 to $27 (Motion App., Exh. C.3. [#134-11] at 14-16);
(4) The Plan's 2018 Participant Disclosure Notice provided to Plan participants by Fidelity, as required by 29 C.F.R. § 2550.404a-5, created March 12, 2018 (Motion App., Exh. A.1. [#134-2] at 10-25);
(5) A copy of Mercer's February 14, 2018 “4th Quarter 2017 Investment Review” (Motion App., Exh. A.2 [#134-2] at 26-107);
(6) A copy of the minutes for the November 8, 2017, Committee meeting[4] (Motion App., Exh. A.3. [#134-2] at 262-265); and
(7) A copy of a presentation entitled “Driving Value” given by Mr. Pujats to members of the Committee on December 19, 2017 (Motion App., Exh. A.20. [#134-5] at 1-31).

         As should be readily apparent from this list, all but one of these documents reflect events occurring after the close of discovery; the one exception is an email sent the day before the discovery deadline. As a matter of simple, linear time it was not possible for defendants to have produced these documents prior to the close of discovery.

         Thereafter, parties have a duty under Rule 26(e)(1) to timely supplement their prior discovery disclosures, a duty about which plaintiffs specifically reminded defendants not two weeks after the close of discovery. More specifically, plaintiffs demanded defendants “supplement their production of Committee minutes and materials that were prepared by the Committee or third parties in connection with the meetings, including Mercer Investment Reviews. This would include materials prepared after the May 10, 2017 meeting.” (Resp. to Obj. App., Exh. A.1. [#163-1 at 5].)

         In compliance with this request and their duties under Rule 26, defendants supplemented their responses in January (document #5 above), February (document #1 & #7 above), March (document #6 above), and April 2018 (document #2, #3, & #4 above). Plaintiffs do not object that these documents were not timely produced once they were created or received by defendants, and I see no basis to conclude otherwise. There thus is no basis to exclude this evidence under Rule 37(c)(1).

         Plaintiffs objections based on hearsay and lack of foundation are wholly conclusory and completely undeveloped. I am neither required nor inclined to guess at the substance of such arguments. See Healthtrio, LLC v. Aetna, Inc., 2014 WL 5473739 at *7 (D. Colo. Oct. 29, 2014) (arguments which are “conclusory and underdeveloped [do] not merit further consideration by the court”). Similarly, plaintiffs' attempt to substantiate their arguments by way of their reply creates no inclination or obligation on my part to address them. See White v. Chafin, 862 F.3d 1065, 1067 (10thCir. 2017); Hubbard v. Nestor, 2019 WL 339823 at *1 (D. Colo. Jan. 25, 2019).

         Accordingly, I overrule plaintiffs' objections and will consider the documents if and where appropriate.

         B. Statute of Limitations

         In certifying this matter as a class action, I defined all three subclasses to commence on January 1, 2009, noting it was premature to determine at that juncture whether plaintiffs could establish facts sufficient to toll limitations. (See Order Re: Plaintiffs' Motion for Class Certification at 4-5 [#119], filed January 30, 2018.) I now find and conclude plaintiffs have failed to adduce sufficient evidence in that regard. Accordingly, any claim based on conduct occurring before January 22, 2010, is time-barred.

         ERISA provides that

[n]o action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of - (1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation. . . .

29 U.S.C. § 1113(1). This provision is a statute of repose, which ordinarily operates to “extinguish a plaintiff's cause of action whether or not the plaintiff should have discovered within that period that there was a violation or an injury.” Fulghum v. Embarq Corp., 785 F.3d 395, 413 (10th Cir. 2015) (citation and internal quotation marks omitted). However, Congress has provided an exception under which, “in the case of fraud or concealment, ” a civil enforcement action “may be commenced not later than six years after the date of discovery of [the] breach or violation.” 29 U.S.C. § 1113. In creating this exception, Congress “effectively restored the judicial doctrines of equitable tolling and equitable estoppel to selected ERISA breach of fiduciary duty claims.” Fulghum, 785 F.3d at 416.

         Because the term “concealment” is not defined in ERISA, [5] the court relies on the ordinary meaning of the term at the time Congress enacted the statute. Id. at 415. Thus, “concealment” is the withholding “of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury or when the defendant conceals the alleged breach of fiduciary duty.” Id. Plaintiffs argue that this standard is met here because (1) the Plan's 2009 IRS Form 5500 did not reveal the amount of Fidelity's compensation; and (2) the Plan's 2012 Participant Fee Disclosure represented that “no plan administrative fees were to be deducted from accounts in the Plan.” Neither argument has traction.

         Plaintiffs' suggestion that the Plan's Form 5500 did not report the amount of Fidelity's compensation is simply wrong. By directing the court to a single line in that 173-page document (see Resp. App., Exh. 68 [#154-69] at 5) - which itself acknowledges the Plan paid Fidelity both direct and indirect compensation - plaintiffs conveniently ignore the remainder of the document, which substantiates the amount of “eligible indirect compensation, ” including revenue-sharing, paid to Fidelity (see Id. at 7- 173). Plaintiffs do not suggest or circumstantiate that the information therein provided was inaccurate or that the Plan otherwise failed to provide any other information the form required. There thus is no evidence of concealment. Moreover, the named plaintiffs have acknowledged they never saw this form. (See Motion App., Exhs. B.5 [#134-10] at 39, B.6 [#134-10] at 45-47, B.7 [#134-10] at 52-53, B.8 [#134-10] at 59-60, B.9 [#134-10] at 65-67, & B.10 [#134-10] at 72-73.) They can hardly have relied on or been deceived by the form under those circumstances. See Jacobs v. Verizon Communications, Inc., 2017 WL 8809714 at *15 (S.D.N.Y. Sept. 28, 2017).

         The representation in the Participant Fee Disclosure that “no plan administrative fees were to be deducted from accounts in the Plan” is similarly taken out of context, and inaccurate in any event. The statement itself was made in a subparagraph discussing direct deductions from individual accounts. As explained more fully below, revenue-sharing is an alternative to such direct charges to Plan participants. Morever, this language was included in a larger section entitled “Fees and Expenses, ” which addressed the type of fees to which participant accounts might be subject, including, particularly, “asset-based fees, ” and explained how such fees were calculated and paid. (See Partial Opp. to Motion for Class Cert. App., Exh.A.3 [#107-1] at 46-47.) Specifically, the document informed participants that “asset-based fees are reflected as a percentage of assets invested in the option and often are referred to as an ‘expense ratio.'” (Id. at 47.) The tables which followed then disclosed the expense ratios for each of the investments offered by the Plan. (See Id. at 48-52.) Plainly, these matters were not concealed.

         Finally, plaintiffs have offered no argument or evidence suggesting defendants concealed anything related to the fiduciary breaches alleged in Count II, involving the Plan's allegedly improvident investments in several funds. Those claims, too, therefore will be limited to matters occurring within six years of the date of the filing of this lawsuit.

         Accordingly, I find ERISA's statute of repose is applied properly here to limit plaintiffs' claims to matters occurring on or after January 22, 2010, six years prior to the date the complaint was filed. Defendants' motion for summary judgment is granted to that extent. The class definitions approved in my Order Re: Plaintiffs' Motion for Class Certification will be amended to reflect this limitation.

         C. ERISA claims

         Under ERISA, plan participants, beneficiaries, and fiduciaries may “bring actions on behalf of a plan to recover for violations of the obligations defined in [29 U.S.C. § 1109].” LaRue v. DeWolff, Boberg & Associates, Inc., 552 U.S. 248, 253, 128 S.Ct. 1020, 1024, 169 L.Ed.2d 847 (2008) (citing 29 U.S.C. § 1132(a)(2)). “The principal statutory duties imposed on fiduciaries by [section 1109] relate to the proper management, administration, and investment of fund assets, with an eye toward ensuring that the benefits authorized by the plan are ultimately paid to participants and beneficiaries.” Id., 128 S.Ct. at 1024 (citation and internal quotation marks omitted). ERISA's fiduciary's duties are derived from and informed by the common law of trusts, Tibble v. Edison International, ___ U.S. ___, 135 S.Ct. 1823, 1828, 191 L.Ed.2d 795 (2015), which are among the highest known to law, La Scala v. Scrufari, 479 F.3d 213, 219 (2nd Cir. 2007). Nevertheless, while “the law of trusts often will inform” determination of issues under ERISA, it “will not necessarily determine the outcome of, an effort to interpret ERISA's fiduciary duties.” Varity Corp. v. Howe, 516 U.S. 489, 497, 116 S.Ct. 1065, 1070, 134 L.Ed.2d 130 (1996).[6]

         ERISA imposes on fiduciaries twin duties of loyalty and prudence. See 29 U.S.C.A. §§ 1104(a)(1)(A) & (B).[7] See also Tussey v. ABB, Inc., 746 F.3d 327, 335 (8th Cir.), cert. denied, 135 S.Ct. 477 (2014). The burden is on plaintiffs to prove defendants breached their fiduciary duties, resulting in losses to the Plan. Pioneer Centres Holding Co. Employee Stock Ownership Plan & Truest v. Alerus Financial, N.A., 858 F.3d 1324, 1337 (10th Cir. 2017), cert. dismissed, 139 S.Ct. 50, (2018).

         The duty of loyalty requires a fiduciary to “discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan.” 29 U.S.C. § 1104(a)(1)(A). Generally speaking, this aspect of ERISA prohibits self-dealing and sales or exchanges between the plan and “parties in interest” or “disqualified” persons. See 29 U.S.C. § 1106. See also Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 143 n.10, 105 S.Ct. 3085, 3091 n.10, 87 L.Ed.2d 96 (1985); Womack v. Orchids Paper Products Co. 401(K) Savings Plan, 769 F.Supp.2d 1322, 1332 n.7 (N.D. Okla. 2011).

         An ERISA fiduciary owes a duty also to plan participants and beneficiaries to discharge his responsibilities using “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.A. § 1104(a)(1)(B). The appropriate yardstick of a fiduciary's duty of prudence under ERISA “is not that of a prudent lay person, but rather that of a prudent fiduciary with experience dealing with a similar enterprise.” Tibble v. Edison International, 2017 WL 3523737 at *10 (C.D. Cal. Aug. 16, 2017) (citation and internal quotation marks omitted). The prudent person standard is an objective one which “focuses on the fiduciary's conduct preceding the challenged decision - not the results of that decision.” Tussey, 746 F.3d at 335 (citation and internal quotation marks omitted). Relatedly, “[b]ecause the fiduciary's obligation is to exercise care prudently and with diligence under the circumstances then prevailing, his actions are not to be judged from the vantage point of hindsight.” Chao v. Merino, 452 F.3d 174, 182 (2ndCir. 2006) (citations and internal quotation marks omitted). See also Osberg v. FootLocker, Inc., 138 F.Supp.3d 517, 552 (S.D.N.Y. 2015) (“A court should not find that a fiduciary acted imprudently in violation of ERISA ...

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