Thondukolam v. Corteva, Inc.

Background

The plaintiffs—Krishnan R. Thondukolam, Stephen W. Records, William C. Mallonee, and David L. Everett—filed a second amended complaint against Corteva, Inc.; DowDuPont, Inc.; DuPont de Nemours, Inc.; E.I. du Pont de Nemours and Company; the Pension and Retirement Plan; and the Administrative Committee. The complaint asserted a fiduciary-duty claim under the Employee Retirement Income Security Act (ERISA), the federal law governing employee pension and benefit plans.

The court had previously dismissed seven causes of action in the first amended complaint while allowing amendment. In that earlier ruling, the court held that a claim based on the decision to restructure failed because a corporate decision to spin off a business division and pension plan is not a fiduciary act. The court also found that the plaintiffs had not alleged enough facts to support a claim based on implementing the spinoff.

Plaintiffs’ theories

The second amended complaint narrowed the case and argued that the plaintiffs were challenging the spinoff’s implementation rather than the corporate decision to conduct the spinoff. The plaintiffs alleged that the restructuring separated plan participants from the company where they had worked while accruing benefits and placed the plan in a shell subsidiary of Corteva. They also pointed to changes in the entities’ operations, names, headquarters, branding, leadership, and number of employees.

The plaintiffs further argued that the defendants improperly transferred the plan to avoid ERISA’s transfer requirements and failed to terminate the plan as required by ERISA. They contended that the plan had undergone the first steps of a standard termination or had been effectively terminated without the required notice, funding, and distribution of assets.

Court’s analysis

The court granted the motion to dismiss. Relying principally on Ninth Circuit precedent, the court concluded that, even accepting the allegations as true, placing the plan with a Corteva subsidiary while placing core business operations and employees with New DuPont was a corporate business decision rather than a fiduciary act. The court also noted that the plaintiffs sought, among other relief, the return of plan assets and liabilities to New DuPont, which supported the conclusion that they were challenging corporate decision-making rather than fiduciary conduct.

The court rejected the plaintiffs’ attempt to distinguish the cited cases based on the separation of the plan from core business operations and employee-participants. It also noted that the complaint did not allege that Corteva’s business was not viable or that any beneficiary had been deprived of promised benefits.

The court held that ERISA’s transfer provision did not apply. That provision governs a transfer of assets or liabilities to another pension plan, and the complaint alleged that the plan retained its assets and participants after the spinoff. The court therefore concluded that the alleged transaction was not a transfer covered by that provision.

The court also rejected the termination theory. The complaint did not allege that the plan had attempted the regulatory steps required for termination. It also did not allege that participants failed to receive benefits, received reduced benefits, that plan assets were removed or distributed, or that required annual contributions were missed. According to the complaint, the plan continued to exist, held all of its assets, and remained maintained by Historical DuPont and Corteva.

The court rejected additional theories based on contract principles and derivative-liability doctrines, including alter ego, veil piercing, and successor liability. It stated that the complaint did not allege a contract theory or identify a specific plan provision violated by the restructuring, and that those derivative-liability doctrines did not establish the asserted fiduciary-duty claim.

Disposition

Judge Yvonne Gonzalez Rogers granted the defendants’ motion to dismiss. Because the plaintiffs had amended their complaint twice and the court found that further amendment of the sole fiduciary-duty claim would be futile, the motion was dismissed with prejudice. The Clerk was directed to close the case, and the order terminated Docket Number 65.