Disberry v. Employee Relations Committee of the Colgate-Palmolive Company

Background

Paula Disberry participated in the Colgate-Palmolive Company Employees Savings and Investment Plan. The opinion states that, in 2020, an unknown fraudster changed account information, accessed Disberry’s account, and obtained a distribution of the account’s contents. Bank of New York Mellon issued a check for $601,144.42 after mandatory tax withholding, and the check was deposited or cashed in Las Vegas. Disberry discovered the theft later that year, reported it, and submitted a benefits claim to the Plan’s Claims Administrator. The claim was denied.

Disberry sued the Employee Relations Committee of the Colgate-Palmolive Company, Alight Solutions LLC, and Bank of New York Mellon Corporation under sections 409 and 502(a)(2) of the Employee Retirement Income Security Act (ERISA). She alleged that the defendants breached fiduciary duties of loyalty and prudence by allowing an unauthorized distribution, failing to respond to warning signs, failing to verify the request, failing to establish safeguards, and failing to monitor other fiduciaries. Each defendant moved to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

Alight’s motion

The court denied Alight’s motion to dismiss. ERISA imposes fiduciary duties on a person to the extent that the person exercises specified authority or control over a plan or its assets. The court explained that a service provider may be a “functional fiduciary” for particular activities even if it is not the plan’s named fiduciary.

The complaint alleged that Alight operated the plan’s customer-service center and website, controlled the process for changing account information and requesting distributions, and processed the disputed distribution. The agreement between Alight and Colgate-Palmolive described Alight’s duties as ministerial and limited its discretionary authority, but it also acknowledged that Alight could become an ERISA fiduciary if it exercised discretion concerning the plan or its assets. The court concluded that the allegations made it possible that Alight had authority or control over the disposition of plan assets when it directed BNY Mellon to make the distribution.

The court also found a sufficient connection between the alleged fiduciary activity and the alleged wrongdoing. The complaint identified repeated contacts with Alight, changes to multiple forms of account information, unsuccessful access attempts, and a request for an immediate distribution of the entire account. It also alleged that Alight failed to wait two weeks after an address change before processing the distribution. The court stressed that denying the motion did not mean Alight would ultimately be found to be an ERISA fiduciary or liable.

BNY Mellon’s motion

The court granted BNY Mellon’s motion to dismiss. It treated BNY Mellon as a directed trustee whose responsibilities under the Master Trust Agreement were to provide payment services as instructed by the plan’s recordkeeper. The agreement stated that BNY Mellon lacked discretionary investment-management authority and discretionary responsibility for plan administration.

The court held that the complaint alleged only that BNY Mellon issued a check after receiving instructions from Alight. It did not allege that BNY Mellon interacted with the fraudster, knew about the warning signs, controlled Disberry’s account information, or had authority over the relevant distribution decision. The court concluded that the complaint did not plausibly allege that BNY Mellon acted as a fiduciary with respect to the challenged conduct or that its conduct was linked to the loss.

The Committee’s motion

The court denied the Committee’s motion to dismiss. The Committee was the plan administrator and named fiduciary, and it did not dispute that it owed fiduciary duties. The court first ruled that Disberry was not required to exhaust further administrative remedies. It distinguished claims seeking benefits under the plan, which may require interpreting plan terms, from this claim alleging statutory breaches of ERISA fiduciary duties. The court concluded that Disberry’s allegations concerning warning signs, procedures, and monitoring did not require interpretation of the plan’s terms.

The court acknowledged that the complaint was thin and generally referred to the “Defendants” without identifying each defendant’s conduct. It nevertheless found enough to allow the claim against the Committee to proceed. The complaint could be read to allege that the Committee failed to monitor Alight or failed to establish reasonable procedures to detect and prevent fraud. Those issues could involve information within the Committee’s possession and could be explored in discovery. The court also found a sufficient alleged connection between any failure to take reasonable protective measures and Disberry’s loss.

The court emphasized that the Committee was not an insurer against every possible theft and that ERISA requires prudence, not perfect foresight. It expressed no view on the ultimate merits of Disberry’s claim and stated that the Committee might prevail if it had taken reasonable steps to protect the plan’s assets.

Other case-management rulings

The court set a discovery schedule requiring 180 days to complete discovery after an amended complaint was filed, with summary-judgment motions and a joint pretrial order due 30 days after discovery closed. Discovery disputes were referred to Magistrate Judge Ona Wang through the procedure described in the order.

Alight also moved to seal its Master Services Agreement and its investigation report. The court did not make a final ruling allowing those materials to remain fully sealed. It directed Alight to submit a short explanation of why portions of the agreement were proprietary and to identify specific portions of the investigation report that should be redacted, with reasons addressing the presumption of public access.

Disposition

The court denied Alight’s motion to dismiss, granted BNY Mellon’s motion to dismiss, and denied the Committee’s motion to dismiss. Judge Colleen McMahon directed the Clerk to remove the listed motions from the court’s list of open motions.