Plutzer v. Bankers Trust Company of South Dakota

Background

Edward Plutzer sued Bankers Trust Company of South Dakota (BTC) and Haresh T. Tharani, Michael J. Setola, Scott Kane, and Manu Mirchandani. He sued on behalf of himself and a proposed class of other participants in the Tharanco Group, Inc. Employee Stock Ownership Plan (ESOP). The complaint alleged that BTC, the plan’s trustee, caused the plan to buy all of Tharanco’s outstanding stock from the individual defendants for $133,430,000 in 2015, even though the stock allegedly was worth less than the purchase price. Plutzer also alleged that BTC breached its fiduciary duties and that the individual defendants participated in prohibited transactions under the Employee Retirement Income Security Act (ERISA).

The complaint identified three challenged claims: a prohibited-transaction claim against BTC, a fiduciary-duty claim against BTC, and a prohibited-transaction claim against the individual defendants. It also included a separate claim seeking disgorgement of certain payments from BTC, but the defendants did not move to dismiss that claim. The court did not address that claim because, by its terms, it depended on the prohibited-transaction claim surviving.

Standing analysis

The defendants moved to dismiss for failure to state a claim. The court independently considered whether Plutzer had Article III standing, which requires a plaintiff to show a concrete and personal injury, a connection between that injury and the defendant’s conduct, and a likelihood that the requested relief would remedy the injury.

The court concluded that Plutzer had not plausibly alleged a concrete injury. The complaint cited Tharanco stock valuations of $13,250,000 in 2015, $30,800,000 in 2017, $25,200,000 in 2018, and $9,800,000 in 2019, compared with the plan’s $133,430,000 purchase price. But Plutzer expressly did not claim that the valuations were accurate and argued that discovery was needed to determine the stock’s fair market value. The court held that, without a reliable allegation showing that the transaction caused harm, the complaint did not establish an injury recognized by the Constitution.

The court also found that the complaint did not adequately connect any injury to the defendants. As to the individual defendants, Plutzer had not sufficiently alleged facts showing that they qualified as ERISA “parties in interest,” a status relevant to liability for the alleged prohibited transaction. As to BTC, the court noted that BTC stopped serving as trustee in 2016, while some of the alleged valuation declines occurred later, after GreatBanc Trustee, a non-party, became trustee. The court found insufficient facts connecting those later declines to BTC’s conduct.

Disposition

The court concluded that Plutzer lacked Article III standing and that it therefore lacked jurisdiction to decide the merits of the ERISA claims. The court dismissed the complaint without prejudice. The court denied the defendants’ motions for oral argument and directed the clerk to terminate the listed motions and close the case. The opinion did not decide whether the alleged ERISA violations occurred.