United States District Court, D. Colorado
BONNIE BIRSE, and GERAD DETWILER, on behalf of all similarly situated participants and beneficiaries of the CenturyLink Dollars & Sense 401k Plan, Plaintiffs,
v.
CENTURYLINK, INC, and CENTURYLINK INVESTMENT MANAGEMENT COMPANY, Defendants.
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.
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