Birse v. Centurylink, Inc.

          ORDER AFFIRMING IN PART AND REJECTING IN PART THE RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE NINA Y. WANG

          CHRISTINE M. ARGUELLO UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on review of the Recommendation by United States Magistrate Judge Nina Y. Wang (Doc. # 78), wherein she recommends that this Court grant Defendants' Motion to Dismiss Plaintiffs' Second Amended Complaint (“SAC”) (Doc. # 58). Plaintiffs, Bonnie Birse and Gerad Detwiler, timely objected to part of the Recommendation. (Doc. # 88.) For the following reasons, Plaintiffs' objections are overruled in part and granted in part, and the Court affirms the Recommendation in part and rejects it in part, dismissing Plaintiffs' claims without prejudice.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Magistrate Judge Wang's Recommendation provided a thorough recitation of the factual and procedural background in this case. The Recommendation is incorporated herein by reference, see 28 U.S.C. § 636(b)(1)(B); Fed.R.Civ.P. 72(b), and the facts will be repeated only to the extent necessary to address Plaintiffs' objections.

         Defendant CenturyLink, Inc. (“CenturyLink”) is a publicly-traded telecommunications company. (Doc. # 53 ¶ 18.) In 2011, CenturyLink acquired CenturyLink Investment Management Company (“CIM”). (Id. ¶ 19.) CenturyLink uses CIM to manage the retirement plans provided to its employees. (Id. ¶¶ 22-24.) In November 2011, CenturyLink named CIM the Plan Investment Fiduciary for its two defined-contribution 401(k) retirement plans: the CenturyLink Dollars & Sense 401(k) Plan (“Dollars & Sense Plan” or “Plan”); and the CenturyLink Union 401(k) Plan (“Union Plan”). (Id. ¶ 22.) Shortly thereafter, CenturyLink and CIM formed a Master Trust to hold the combined assets of the Dollars & Sense Plan and the Union Plan. (Id.)

         CIM manages the Master Trust and provides twenty-two investment options for CenturyLink employees that are invested through the Dollars & Sense Plan. (Id. ¶ 23.) One of those funds is the “Large Cap Fund” (“the Fund”), an actively managed fund benchmarked against the Russell 1000 Stock Index-an index of large-capitalization (“large cap”) stocks. (Id. ¶ 24.) The Fund allocated its assets between four investment firms, one actively managed mutual fund, and one large cap index fund. (Id. ¶ 28.) According to the Fund, it chose this allocation strategy to diversify its holdings across different management styles in an effort to reduce the risk inherent in relying on a smaller number of investment options and hopefully outperform the benchmark over the long-term. (Id. ¶ 29.) Since the Fund's inception on April 1, 2012, it has underperformed its benchmark by an average of 2.11%. (Id. ¶ 34.)

         Plaintiffs are CenturyLink employees and investors in the Dollar & Sense Plan. (Id. ¶¶ 16, 17.) Plaintiffs' SAC asserts three claims for relief against Defendants. Specifically, Plaintiffs allege: (1) CIM breached its fiduciary duty by inadequately designing, selecting, and monitoring the Fund; (2) CenturyLink failed to monitor CIM by allowing CIM to imprudently select and monitor the Fund; and (3) CenturyLink, as a co-fiduciary, failed to remedy CIM's breach of its duty to monitor the Fund. (Id. ¶¶ 52-67.)

         Defendants filed a Motion to Dismiss Plaintiffs' SAC on May 16, 2018, which was fully briefed. (Doc. ## 58, 60, 61.) This Court referred the Motion to Magistrate Judge Wang. (Doc. # 59.) Accordingly, the Magistrate Judge issued a Recommendation (Doc. # 78), which specifically recommended:

I) Not to dismiss on the basis of standing (Id. At 9);

II) Dismissal of the First Claim for Relief against CIM (Id. at 13, 20);

III) Dismissal of the Second and the Third Claims for Relief against CenturyLink (Id. at 21);

IV) Deferral of any statute of limitations issues to the summary judgement phase (Id. at 29);

V) Not to dismiss based on the ERISA Safe Harbor (Id. at 30); and

VI) Dismissal with prejudice. (Id. at 31.)

         Plaintiffs object to the Magistrate Judge's Recommendation regarding sections II, III, and VI.^[1] (Doc. # 88.) Defendants filed a Response to the Objection on January 7, 2019 (Doc. # 91), and Plaintiffs filed a Reply on January 16, 2019 (Doc. # 92).

         II. STANDARDS OF REVIEW

         A. REVIEW OF A MAGISTRATE JUDGE'S RECOMMENDATION

         When a magistrate judge issues a recommendation on a dispositive matter, Federal Rule of Civil Procedure 72(b)(3) requires that the district judge “determine de novo any part of the magistrate judge's [recommended] disposition that has been properly objected to.” An objection is properly made if it is both timely and specific. United States v. One Parcel of Real Property Known As 2121 East 30th Street, 73 F.3d 1057, 1059 (10th Cir. 1996). In conducting its review, “[t]he district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions.” Fed.R.Civ.P. 72(b)(3). Any arguments raised for the first time in objections are deemed waived and need not be considered by the district court. Marshall v. Chater, 75 F.3d 1421, 1426 (10th Cir. 1996).

         B. ...