United States District Court, M.D. Tennessee, Nashville Division
LOREN L. CASSELL, et al. Plaintiffs
VANDERBILT UNIVERSITY, et al. Defendants
WAVERLY D. CRENSHAW, JR., CHIEF UNITED STATES DISTRICT JUDGE
before the Court is Defendants' Motion to Dismiss the
Amended Complaint (Doc. No. 42). For the reasons stated
herein, Defendants' Motion to Dismiss will be
GRANTED in part and DENIED in part.
case is one of several cases filed in district courts across
the country alleging that university retirement/pension plans
have not been managed with loyalty or prudence, in violation
of the Employee Retirement Income Security Act
(“ERISA”). Plaintiffs, individually and on behalf
of a purported class, brought this action under 29 U.S.C.
§ 1132(a)(2), for breach of fiduciary duties by
Defendants with regard to the Vanderbilt University
Retirement Plan and the Vanderbilt University New Faculty
Plan (together, the “Plan”). The named Plaintiffs
are participants in the Plan, and the Defendants are all
alleged to be fiduciaries of the Plan.
Plan is a defined contribution, individual account, employee
benefit plan under ERISA, and it requires mandatory
participation for eligible employees. (Doc. No. 38 at
¶¶ 9 and 11) The Amended Complaint alleges that, as
of December 31, 2014, the Plan had 41, 863 participants and
$3.4 billion in assets. (Id. at ¶ 13)
Plaintiffs assert that defined contribution plans allow
employees to contribute a percentage of their pre-tax
earnings to the plan, with the employer often matching those
contributions up to a certain percentage. Each participant
has an individual account and directs her plan contributions
into one or more investment options in a lineup chosen and
assembled by the plan fiduciaries. (Id. at ¶
contend that Defendants violated ERISA by:
COUNT I - breaching their fiduciary duties by locking the
Plan into a certain stock account (CREF) and into the
services of a certain record-keeper (TIAA).
COUNT II - engaging in “prohibited transactions”
by locking the Plan into the CREF Stock Account and the
record-keeping services of TIAA.
COUNT III - breaching their fiduciary duties by paying
unreasonable administrative fees.
COUNT IV - engaging in “prohibited transactions”
by paying excessive administrative fees.
COUNT V - breaching their fiduciary duties by agreeing to
unreasonable investment, management, and other fees and
failing to monitor imprudent investments.
COUNT VI - engaging in “prohibited transactions”
by paying fees to certain third parties in connection with
the Plan's investment in those parties' investment
COUNT VII - failing to monitor other fiduciaries. (Doc. No.
38) Defendants have moved to dismiss all of Plaintiffs'
claims for failure to state claims upon which relief may be
Plaintiffs have utterly failed to comply with Rule 8(a)(2) of
the Federal Rules of Civil Procedure by filing a 160-page
Amended Complaint, for purposes of a motion to dismiss, the
Court must take all of the factual allegations in the
complaint as true. Ashcroft v. Iqbal, 129 S.Ct.
1937, 1949 (2009). To survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as
true, to state a claim for relief that is plausible on its
face. Id. 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. Threadbare recitals
of the elements of a cause of action, supported by mere
conclusory statements, do not suffice. Id. When
there are well-pleaded factual allegations, a court should
assume their veracity and then determine whether they
plausibly give rise to an entitlement to relief. Id.
at 1950. A legal conclusion couched as a factual allegation
need not be accepted as true on a motion to dismiss.
Fritz v. Charter Township of Comstock, 592 F.3d 718,
722 (6th Cir. 2010).
is a comprehensive statute designed to promote the interests
of employees and their beneficiaries in employee benefit
plans. Chao v. Hall Holding Co., Inc., 285 F.3d 415,
425 (6th Cir. 2002); Pledger v. Reliance Trust
Co., 240 F.Supp.3d 1314, 1321 (N.D.Ga. 2017). The
statute accomplishes this purpose by imposing fiduciary
duties of prudence and loyalty on plan fiduciaries.
Id. ERISA authorizes a plan participant to bring a
civil suit against plan fiduciaries for breaches of the
fiduciaries' duties of loyalty and prudence. Id.
at 1322; 29 U.S.C. § 1132(a)(2).
Duty of Prudence
ERISA's duty of prudence, a fiduciary is required to
discharge his duties “with the care, skill, prudence,
and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims.” 29 U.S.C. §
1104(a)(1)(B). The test for determining whether a fiduciary
has satisfied his duty of prudence is whether the fiduciary,
at the time he engaged in the challenged transactions,
employed the appropriate methods to investigate the merits of
the investment and to structure the investment. Pfeil v.
State Street Bank and Trust Co., 806 F.3d 377, 384
(6th Cir. 2015); Sacerdote v. New York
Univ., 2017 WL 3701482 at * 4 (S.D. N.Y. Aug. 25, 2017).
The Court must focus on whether the fiduciary engaged in a
reasonable decision-making process, consistent with that of a
prudent person acting in a like capacity. Pfeil, 806
F.3d at 384. Because the content of the duty of prudence
turns on the circumstances prevailing at the time the
fiduciary acts, the appropriate inquiry will necessarily be
context specific. Id. at 385.
Duty of Loyalty
ERISA's duty of loyalty, a fiduciary “shall
discharge his duties with respect to a plan solely in the
interest of the participants and beneficiaries” and for
the exclusive purpose of (1) providing benefits to
participants and their beneficiaries and (2) defraying
reasonable expenses of administering the plan. 29 U.S.C.
§ 1104(a)(1)(A). To state a loyalty-based claim under
ERISA, a plaintiff must do more than simply recast purported
breaches of the duty of prudence as disloyal acts.
Sacerdote, 2017 WL 3701482 at * 5. Rather, a
plaintiff must allege facts that permit a plausible inference
that the defendant engaged in transactions involving
self-dealing or in transactions that otherwise involve or
create a conflict between the trustee's fiduciary duties
and personal interests. Id. In other words, to
implicate the concept of loyalty, a plaintiff must allege
plausible facts supporting an inference that a fiduciary
acted for the purpose of providing benefits to
itself or some third party. Id.
prohibits certain transactions between a plan and a
“party in interest.” 29 U.S.C. §
1106(a). Included in those transactions are (1) the
sale or exchange of any property between the plan and a party
in interest; (2) the furnishing of goods, services or
facilities between the plan and a party in interest; and (3)
the transfer to, or use by or for the benefit of a party in
interest, of any assets of the plan. 29 U.S.C. §
1106(a)(1)(A), (C) and (D). To state a claim under this
statute, a plaintiff must allege that (1) the defendant is a
fiduciary, (2) the defendant caused the plan to engage in one
of the prohibited transactions, (3) the transaction was
between the plan and a party-in-interest or involved plan
assets, and (4) the defendant knew or should have known that
the transaction was prohibited. Sacerdote, 2017 WL
3701482 at * 4.
DUTY OF LOYALTY
regard to the fiduciary duty of loyalty, the Court finds that
Plaintiffs have not alleged sufficient facts to show that
Defendants engaged in transactions involving self-dealing or
that otherwise involved or created a conflict between
Defendants' fiduciary duties and personal interests. Even
though Plaintiffs allege that various third parties
benefitted from Defendants' alleged mismanagement, the
Amended Complaint fails to allege plausible facts supporting
an inference that Defendants acted for the purpose
of providing benefits to any third party or to
themselves. Even if those third parties are considered
“parties of interest, ” as defined in ERISA, in
order to show that Defendants breached the fiduciary duty of
loyalty, Plaintiffs must sufficiently allege that Defendants
acted for the purpose of benefitting those third
parties or themselves. When claims do not support an
inference that the defendants' actions were for the
purpose of providing benefits to themselves or someone else
and simply had that incidental effect, loyalty claims should
be dismissed. Sacerdote, 2017 WL 3701482 at *
Cunningham v. Cornell Univ., 2017 WL 4358769 at * 4
(S.D. N.Y. Sept. 29, 2017).
the Amended Complaint as a whole, the claims allege that
Defendants followed an imprudent process, not that they acted
disloyally. Plaintiffs' loyalty claims are
characterizations that piggyback off their prudence claims.
The facts alleged in the Amended Complaint assert that
Defendants failed to manage and make decisions for the Plan
in a prudent manner, not that Defendants engaged in
self-dealing or acted for the purpose of benefitting a third
party. (e.g., Doc. No. 38 at ¶¶ 104-151, 158-218,
225-231, 240-247, 255-267 and 275-280) Any facts that