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In re Marsh ERISA Litigation

December 14, 2006


The opinion of the court was delivered by: Shirley Wohl Kram, U.S.D.J.



In October 2004, the Office of the New York State Attorney General (the "NYAG") filed a civil action alleging that Marsh & McLennan Companies, Inc. ("MMC") and its insurance brokerage subsidiary, Marsh, Inc. ("Marsh"), engaged in fraudulent business practices. The announcement of that lawsuit led to a precipitous decline in the value of MMC stock. This litigation followed shortly thereafter. The plaintiffs here, participants in the Marsh & McLennan Companies Stock Investment Plan (the "Plan"), allege that the Plan's fiduciaries violated the Employee Retirement Income Security Act of 1974 ("ERISA") by breaching their fiduciary duties to the Plan during the period spanning July 1, 2000, to January 31, 2005 (the "Class Period"). Several defendants have now filed motions to dismiss certain portions of the Consolidated Class Action Complaint (the "Complaint"). For the reasons set forth below, these motions to dismiss are granted in part and denied in part.


On October 14, 2004, the NYAG filed suit against MMC and Marsh in the Supreme Court of New York. The NYAG alleged that the corporation and its subsidiary had defrauded their clients--entities seeking insurance coverage--by steering business to select third-party insurance providers for the sole purpose of maximizing their receipt of contingent commissions from those providers. (Compl. ¶¶ 90, 97, 114-16.) At their most egregious, these practices took the form of bid-rigging, whereby Marsh would allegedly steer a client's business to a preordained insurance provider by persuading other insurance providers to place above-market bids for that business. (Compl. ¶¶ 117-22.) MMC ultimately settled the NYAG lawsuit for $850 million (Compl. ¶ 92), but not before shares of MMC stock fell 38% and "erased millions of dollars in retirement savings" (Comp. ¶ 130). While MMC and Marsh were allegedly engaged in these fraudulent business practices, the Plan continued to invest heavily in MMC stock throughout the Class Period, despite the fact that Plan fiduciaries were allegedly aware of the fraudulent business practices and failed to communicate the potential risks of investment in MMC stock to Plan participants or to alter their investment strategy.

The named plaintiffs, Donald Hundley, Conrad Simon, and Leticia Hernandez ("Plaintiffs"), all of whom are participants in the Plan (Compl. ¶¶ 12-14), brought the instant lawsuit pursuant to ERISA sections 409 and 502 "in a representative capacity for losses suffered by the Plan as a result of breaches of fiduciary duty" (Compl. ¶ 7). Plaintiffs seek damages for "losses to the Plan for which Defendants are personally liable" and "other equitable relief from Defendants, including, without limitation, injunctive relief and, as available under applicable law, constructive trust, restitution, equitable tracing, and other monetary relief." (Compl. ¶ 6.)

Plaintiffs name several classes of defendants, including MMC, its CEO, Jeffrey Greenberg ("Greenberg"), its Board of Directors (the "Director Defendants"), and three committees--the Investment Committee, the Administrative Committee, and the Oversight Committee--comprised of various directors and officers of MMC and Marsh (collectively, "Defendants"). (Compl. ¶¶ 15-31.) Each class of defendants, and each individual within those classes, is alleged to have been a Plan fiduciary during the Class Period and to have breached various fiduciary duties to the Plan under ERISA section 409.

The Complaint alleges five separate counts against the various classes of defendants. Count I alleges a breach of fiduciary duty against MMC, the Director Defendants, and the Investment Committee for failure to prudently and loyally manage the Plan and its assets (the "Prudence Claim"). (Compl. ¶¶ 164-82.) Count II alleges a breach of fiduciary duty against the Investment Committee and the Administrative Committee (together, the "Communications Defendants") for failure to provide complete and accurate information to participants and beneficiaries. (Compl. ¶¶ 183-97.) Count III alleges a breach of fiduciary duty against Greenberg, the Director Defendants, and the Oversight Committee (together, the "Monitoring Defendants") for failure to monitor the performance of other fiduciaries. (Compl. ¶¶ 198-207.) Count IV alleges co-fiduciary liability against MMC, Greenberg, Sandra S. Wijnberg, William L. Rosoff, the Communications Defendants, and the Monitoring Defendants. (Compl. ¶¶ 208-20.) Finally, "[t]o the extent that MMC is found not to have been a fiduciary or to have acted in a fiduciary capacity with respect to the conduct alleged to have violated ERISA," Count V alleges that MMC knowingly participated in a breach of fiduciary duty. (Compl. ¶¶ 221-24.)


In three separate motions, Defendants seek to dismiss the Complaint on several grounds and against various defendants.*fn1 The Court first lays out the general legal standards applicable to these motions. The Court then considers two issues which span multiple counts of the Complaint: the applicability of Federal Rule of Civil Procedure 23.1 to representative claims brought pursuant to ERISA section 502(a)(2); and the ability of Plaintiffs to state claims for equitable relief under ERISA section 502(a)(3). Finally, the Court addresses arguments challenging each of the substantive counts of the Complaint.

A. Legal Standards for Pleading ERISA Fiduciary Duty Claims Under Rule 12(b)(6)

When deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the factual allegations in the complaint are assumed to be true and all reasonable inferences are drawn in the plaintiff's favor. Nechis v. Oxford Health Plans, Inc., 421 F.3d 96, 100 (2d Cir. 2005) (citing E.E.O.C. v. Staten Island Sav. Bank, 207 F.3d 144, 148 (2d Cir. 2000)). At the motion-to-dismiss stage, "[t]he appropriate inquiry is not whether a plaintiff is likely to prevail, but whether he is entitled to offer evidence to support his claims." Id. (citing Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir. 1998)). Thus, dismissal is "appropriate only if 'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Harris v. City of New York, 186 F.3d 243, 250 (2d Cir. 1999) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).

Furthermore, fiduciary duty claims brought under ERISA are subject only to the "simplified pleading standard" of Federal Rule of Civil Procedure 8(a) rather than the heightened pleading standard of Federal Rule of Civil Procedure 9(b). In re Worldcom, Inc., 263 F. Supp. 2d 745, 756 (S.D.N.Y. 2003) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 513 (2002)); accord In re Polaroid ERISA Litig. (In re Polaroid I), 362 F. Supp. 2d 461, 469-71 (S.D.N.Y. 2005). Thus, to survive this motion to dismiss, the Complaint must include only a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a).

B. The Applicability of Rule 23.1 to Section 502(a)(2) Claims

Defendant Greenberg argues that plaintiffs seeking relief under section 502(a)(2) must make a demand pursuant to Federal Rule of Civil Procedure 23.1. Although this argument is only advanced by Greenberg, the Court notes that if it were valid, it would require dismissal in favor of all defendants to the extent that the Complaint is premised on ...

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