Bozzini v. Ferguson Enterprises LLC

Background

The opinion concerns a putative class action under the Employee Retirement Income Security Act (ERISA). The court addressed three pending motions to dismiss: one by the Ferguson defendants, one by the Prudential defendants, and one by the CapFinancial defendants.

Ferguson Defendants’ Motion

The court granted in part and denied in part the Ferguson defendants’ motion to dismiss.

The court dismissed the plaintiffs’ first cause of action, alleging breach of the fiduciary duty of prudence, with leave to amend. The court held that allegations about retaining underperforming funds, failing to select lower-cost shares, choosing actively managed funds over passively managed index funds, and failing to invest in better-performing funds were insufficient without additional facts. The plaintiffs’ allegations that the defendants misrepresented material information about plan options and expenses also did not plausibly state a claim.

The court dismissed the second cause of action, alleging breach of the fiduciary duty of loyalty, with leave to amend. The plaintiffs did not clearly identify facts in the operative complaint that distinguished this claim from the prudence claim.

The court dismissed the third and fifth causes of action, alleging prohibited transactions, with leave to amend. It stated that the plaintiffs needed to allege facts connecting the administrative fees to the specific services provided to the specific plan and facts suggesting that the same services were available for less in the market. The court did not reach the parties’ remaining arguments concerning these claims.

The court dismissed the fourth cause of action for failure to monitor and the seventh cause of action for breach of duty by omission, with leave to amend. It explained that the monitoring claim depended on an underlying fiduciary-duty violation and that the omission claim likewise depended on underlying wrongful conduct.

The court dismissed the eighth cause of action for failure to furnish required plan documents, with leave to amend. It granted as unopposed the portion of the motion challenging standing for this claim because the plaintiffs did not respond to that argument. It also found that the plaintiffs’ general request for information lacked facts identifying the requested materials or showing that Ferguson had to provide them.

The court granted as unopposed the Ferguson defendants’ challenge to standing for claims involving excess fees that the plaintiffs did not pay. But it denied the challenge based on the plaintiffs’ failure to identify the specific fund in which they invested. The court found the allegations sufficient at this stage because each plaintiff alleged investing in one or more challenged funds.

Regarding timeliness, the court granted leave to amend so the plaintiffs could allege any facts they had concerning concealment, which they relied on to avoid dismissal under the statute of repose. The court also dismissed William Brundage and Richard Winckler from the action, while granting leave to amend allegations concerning whether they acted as ERISA fiduciaries.

The court struck the plaintiffs’ jury demand. It relied on Ninth Circuit precedent holding that plan participants and beneficiaries are not entitled to jury trials for claims brought under, or preempted by, ERISA section 502, and rejected the argument that a later Supreme Court decision had changed that rule.

Prudential Defendants’ Motion

The court granted with leave to amend the Prudential defendants’ motion to dismiss. It held that collecting definitively calculable, nondiscretionary compensation according to a contract with the fiduciary-employer was not a breach of fiduciary duty. To the extent the plaintiffs relied on other conduct, they had not alleged enough facts to plausibly establish Prudential’s fiduciary status. The court also found that the plaintiffs had abandoned any theory of non-fiduciary liability by failing to defend it in their opposition brief.

CapFinancial Defendants’ Motion

The court granted with leave to amend the CapFinancial defendants’ motion to dismiss. The plaintiffs asserted prohibited-transaction claims against CapFinancial but used their opposition brief to present a theory that the CapFinancial investment fiduciaries had manipulated or increased their indirect compensation. Because the operative complaint did not contain corresponding allegations, the court dismissed the two claims. It allowed amendment if the plaintiffs had a factual basis for non-conclusory allegations consistent with that theory.

Next Steps and Disposition

The plaintiffs may file a second amended complaint curing the identified deficiencies within 30 days of the order. They may not add claims or parties without the defendants’ consent or the court’s permission. The court imposed page limits for any future consolidated dismissal briefing.