United States District Court, D. Connecticut
LEONARD D. WOOD II on behalf of the KeHE Distributors, Inc. 401k Retirement Savings Non-Union Plan, and MAYA SHAW on behalf of the EXCO Resources, Inc. 401k Plan and all other similarly situated ERISA-covered employee pension Benefit plans, Plaintiffs,
PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY, Defendant.
MEMORANDUM OF DECISION GRANTING IN PART AND DENYING
IN PART DEFENDANT'S MOTION TO DISMISS [DKT. NO.
Vanessa L. Bryant, United States District Judge.
Plaintiffs, Leonard D. Wood and Maya Shaw bring this action,
on behalf of their employers' 401(k) retirement plans,
against Defendant Prudential Retirement Insurance and Annuity
Company, alleging violations of the Employee Retirement
Income Security Act of 1973 (“ERISA”), Sections
404 and 406, 29 U.S.C. §§ 1104, 1106. Currently
pending before the Court is Defendant's Motion to
Dismiss. For the reasons that follow, Defendant's Motion
to Dismiss is GRANTED IN PART with respect to Plaintiffs'
claims for non-fiduciary liability and DENIED IN PART with
respect to all other claims.
following facts and allegations are taken from the Complaint
[Dkt. No. 1] and undisputed exhibits to Defendant's
Motion to Dismiss [Dkt. No. 26, Exhs. A-G.]
bring this action on behalf of their own 401(k) retirement
plans and a class of similarly situated retirement plans (the
“Plans”) that invested in “Guaranteed
Income Accounts” (“GIA”) offered by the
Defendant within six years of December 5, 2015. [Compl.
¶¶ 1-3.] Defendant offers and sells GIA to
retirement plans as part of group annuity contracts. [Compl.
¶ 2; Def. Mot. to Dismiss, Exhs. B and C,
“Guaranteed Income Fund Investment Addendum”
(“Addenda”).] GIA assets are invested in
Defendant's Guaranteed Income Fund (“GIF”),
and GIF assets are in turn invested in Defendant's
general account.[Compl. ¶ 2; Addenda § 1.1.] GIA
are intended to provide investment income to Plan
participants through a guarantee of principal invested and a
minimum rate of interest on investments. [Compl. ¶¶
12, 15.] The GIA applicable interest rate is announced
semi-annually, and remains “guaranteed against
change” for six months after each announcement.
(Addenda § 1.3.) Although the Defendant sets this
declared interest rate at its “sole and exclusive
discretion” in advance of each semi-annual period,
[Compl. ¶¶ 3-4; Addenda § 1.3], and each
Plaintiff has the option not to reinvest, the investment
agreement provides that the rate must always be greater than
or equal to 1.5 percent. [Dkt. No. 26, Defendant's
Memorandum of Law in Support of Motion to Dismiss
(“Def. Memo.”) at 1, 6-7; Dkt. No. 41,
Plaintiffs' Memorandum in Opposition to Defendant's
Motion to Dismiss (“Pl. Opp.”) at 3; Def. Mot. to
Dismiss, Exh. B, “KeHE Investment Agreement”
§§ 2.1, 2.2.; Def. Mot. to Dismiss, Exh. C,
“EXCO Investment Agreement” §§ 2.1,
2.2; Addenda §§ 1.3, 1.6, 1.8.]
the interest rate is “guaranteed” to be at least
1.5 percent, Plaintiffs allege that Defendant sets the
crediting rate “well below its internal rate of return
. . . on the invested capital it holds through the
[GIA]” and therefore “guarantees a substantial
profit for itself.” [Compl. ¶ 4.] Defendant does
not disclose to its retirement plan clients and their
participants the difference between the crediting rate and
its internal rate of return. Id. Plaintiffs
therefore allege that Defendant “collects tens of
millions of dollars annually in undisclosed compensation from
the retirement plans” in violation of its fiduciary
duties under Section 502 of the Employee Retirement Income
Security Act (“ERISA”), 29 U.S.C. § 1132.
at issue in Defendant's Motion to Dismiss is whether
Defendant is a fiduciary with respect to GIA under ERISA. The
Defendant argues that GIA are “guaranteed benefit
policies” under ERISA § 401(b)(2), 29 U.S.C.
§ 1101(b)(2), and therefore are not “plan
assets” for the purpose of triggering fiduciary
responsibility. [See Def. Memo. at 2, 11-13 (citing
ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A)).]
Defendants also argue that Plaintiffs' allegations
relating to non-fiduciary liability should be dismissed
because they do not seek appropriate equitable relief.
See Id. at 25.
counter that pursuant to John Hancock Mutual Life
Insurance Co. v. Harris Trust and Savings Bank, 510 U.S.
86 (1993) (“Harris Trust”), the GIA are
not guaranteed benefit policies. [See Pl. Opp. at
10.] Plaintiffs claim that because GIA contributions
accumulate interest at variable rates of return, and may be
terminated at Defendant's discretion, the GIA do not
provide a benefit “the amount of which is
guaranteed.” Id. at 10-12. Plaintiffs also
argue that Defendant exercises discretion over Plan assets,
and that the GIF contract's terms are “so onerous
that they effectively preclude Plans and participants from
rejecting the Crediting Rate.” Id. at 24-27.
Standard of Review
survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim
to relief that is plausible on its face.'”
Sarmiento v. United States, 678 F.3d 147 (2d Cir.
2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). While Federal Rule of Civil Procedure 8 does not
require detailed factual allegations, “[a] pleading
that offers ‘labels and conclusions' or
‘formulaic recitation of the elements of a cause of
action will not do.' Nor does a complaint suffice if it
tenders ‘naked assertion[s]' devoid of
‘further factual enhancement.'”
Iqbal, 556 U.S. at 678 (citations and internal
quotations omitted). “Where a complaint pleads facts
that are ‘merely consistent with' a defendant's
liability, it ‘stops short of the line between
possibility and plausibility of ‘entitlement to
relief.'” Id. (quoting Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 557 (2007)). “A claim
has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. (internal citations omitted).
considering a motion to dismiss for failure to state a claim,
the Court should follow a “two-pronged approach”
to evaluate the sufficiency of the complaint. Hayden v.
Paterson, 594 F.3d 150, 161 (2d Cir. 2010). “A
court ‘can choose to begin by identifying pleadings
that, because they are no more than conclusions, are not
entitled to the assumption of truth.'” Id.
(quoting Iqbal, 556 U.S. at 679). “At the second step,
a court should determine whether the ‘well-pleaded
factual allegations, ' assumed to be true,
‘plausibly give rise to an entitlement to
relief.'” Id. “The plausibility
standard is not akin to a probability requirement, but it
asks for more than a sheer possibility that a defendant has
acted unlawfully.” Iqbal, 556 U.S. at 678
(internal quotations omitted).
general, the Court's review on a motion to dismiss
pursuant to Rule 12(b)(6) “is limited to the facts as
asserted within the four corners of the complaint, the
documents attached to the complaint as exhibits, and any
documents incorporated in the complaint by reference.”
McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d
Cir. 2007). The Court may also consider documents of which
the Plaintiffs had knowledge and relied upon in bringing
suit, Brass v. American Film Technologies, Inc., 987
F.2d 142, 150 (2d Cir. 1993), so long as these documents are
“integral” to the complaint and the record is
clear that no dispute exists regarding the documents'
authenticity or accuracy. Faulkner v. Beer, 463 F.3d
130, 133-35 (2d Cir. 2006). While Plaintiffs did not attach
the Plans' annuity contracts to the Complaint, the terms
of these contracts' Guaranteed Income Fund Investment