Clare v. Greatbanc Trust Company
- Andrew Carter
- 1:21-cv-03393
- U.S. District Court · Southern District of New York
- 4
In Clare v. Greatbanc Trust Company, Judge Carter granted the Long Point Defendants’ motion to dismiss Amanda Clare’s ERISA claims.
Amanda Clare’s ERISA claims against the Long Point Defendants were dismissed at the pleading stage; the court also directed that the listed Long Point entities be terminated as parties. GreatBanc Trust Company was not the subject of this motion’s disposition in the opinion.
What happened
In Clare v. Greatbanc Trust Company, Amanda Clare, an employee stock-ownership-plan participant, sued GreatBanc Trust Company and Long Point defendants under the Employee Retirement Income Security Act. She alleged that the plan paid an inflated price for company stock and left the company with loans.
The Long Point Defendants argued that Clare’s claims should be dismissed. The court found that Clare had not adequately alleged facts showing that each defendant knew or should have known the facts underlying the alleged prohibited transactions. The court also found that she had not sufficiently alleged that the transactions were unlawful.
Judge Andrew L. Carter, Jr. granted the Long Point Defendants’ motion to dismiss. The court directed the Clerk to terminate the motion and listed several Long Point entities as terminated parties, and referred the action to a magistrate judge for general pretrial supervision.
The detailed version
- Clare v. Greatbanc Trust Company · No. 1:21-cv-03393
- Andrew Carter
- Mar. 31, 2022
Background
Amanda Clare sued GreatBanc Trust Company, Long Point Capital, Inc., and several Long Point entities under Sections 404, 406, 409, 410, and 502(a) of the Employee Retirement Income Security Act (ERISA). Clare is a participant in the EYP Holdings, Inc. Employee Stock Ownership Plan (ESOP). The opinion states that GreatBanc served as the ESOP’s trustee and that, as part of the ESOP transaction, the plan bought stock from existing shareholders, including Long Point Capital.
Clare alleged that the price paid for the stock did not reflect its fair market value and that the transaction saddled EYP with loans. She alleged that the inflated price violated ERISA and that the Long Point Defendants were parties in interest to prohibited transactions.
Procedural history and issues
GreatBanc filed an answer. The remaining defendants jointly moved to dismiss. In her opposition, Clare withdrew her claims against Long Point Capital Fund II, L.P. and Long Point Capital Partners II, L.P. The court therefore considered the motion as to Long Point Capital, Inc., Long Point Capital Fund II, L.P., and Long Point Capital Fund III, L.P., which the opinion collectively calls the Long Point Defendants. The opinion’s entity descriptions contain some internal inconsistencies, including references to Fund II and Fund III, but the ruling identifies the motion as the Long Point Defendants’ motion to dismiss.
The court applied Rule 12(b)(6), which tests whether a complaint alleges enough facts to state a legally plausible claim. For a prohibited-transaction claim under ERISA Section 406(a) against a non-fiduciary, the court explained that the plaintiff must allege, among other things, that the plan fiduciary caused the prohibited transaction and that the non-fiduciary knew or should have known the relevant facts.
Court’s reasoning
The court held that Clare’s complaint contained only limited allegations about whether each Long Point Defendant knew or should have known the facts underlying the ESOP transactions. The court characterized the allegations that the defendants knew or should have known about the transaction as conclusory statements rather than supporting facts.
The court also held that Clare had not sufficiently alleged that the underlying transaction was unlawful. Although the complaint referred to GreatBanc’s lack of due diligence, it did not allege that the Long Point Defendants knew whether GreatBanc’s diligence was sufficient. The court rejected Clare’s suggestion that discovery could fill these gaps, explaining that discovery cannot substitute for the factual allegations required at the pleading stage.
Disposition
The court granted the Long Point Defendants’ motion to dismiss. The Clerk was directed to terminate the motion and terminate the listed Long Point parties, including Long Point Capital, Inc., Long Point Capital Fund II, L.P., Long Point Capital Partners II, L.P., Long Point Capital Fund III, L.P., and Long Point Capital Partners III, L.P. The court also referred the action to the designated magistrate judge for general pretrial supervision. The opinion does not state that the dismissal was with or without prejudice.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.