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In re Pfizer Inc. Erisa Litigation

March 20, 2009


The opinion of the court was delivered by: Laura Taylor Swain, United States District Judge


This putative class action is brought pursuant to §§ 502(a)(2) and (a)(3) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1132(a)(2) and (a)(3), on behalf of current or former participants ("Plaintiffs") in retirement savings plans (the "Plans") sponsored by Pfizer Inc. ("Pfizer") and the Pharmacia Corporation ("Pharmacia"). Named as defendants are Pfizer, Pharmacia, and one hundred and two individuals (sixty-two named defendants and forty unnamed defendants, sued as "John Does") who are current and former members of the companies' boards of directors and/or the committees responsible for administering these retirement plans (the "Individual Defendants") (collectively, "Defendants"). Plaintiffs allege that Defendants either knew or should have known that Pfizer and Pharmacia were engaging in marketing and communications activities concerning two drugs, Celebrex and Bextra, that artificially inflated the value of Pfizer and Pharmacia securities and rendered them imprudent and inappropriate investments, and that Pfizer's stock price fell after certain revelations regarding these two drugs. Plaintiffs assert that Defendants are liable to the Plans under ERISA for losses suffered by the Plans on their holdings of Pfizer and Pharmacia stock. The Court has jurisdiction of Plaintiffs' claims pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e).

Defendants have moved to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and, pursuant to Rule 12(b)(1), to dismiss all claims regarding certain plans covering employees in Puerto Rico. For the reasons that follow, Defendants' motion is granted in part and denied in part.


The following facts are drawn from the Consolidated Class Action Complaint ("CCAC") and the Consolidated Amended Class Action Complaint ("Complaint"), which are identical in all respects except for the addition of a named plaintiff in paragraph thirty-five of the Complaint and the resulting difference in paragraph numbers.*fn1 The Court takes these facts as true for purposes of this motion to dismiss.

The Parties

Plaintiffs are current or former participants in defined contribution plans sponsored by Pfizer, Pharmacia, or Warner-Lambert.*fn2 The four named plaintiffs, Peter F. Muffie, Alan Berlow, David C. Harber, and Vincent Romano, are current and past participants in the Pfizer and Pharmacia plans. (Compl. ¶¶ 32-35). The proposed class consists of all persons, other than the Defendants, who were participants in or beneficiaries of any of the relevant plans at any time between August 29, 2000 through and including December 9, 2005 (the "Class Period"). (Compl. ¶¶ 10, 11, 19.)

The Complaint identifies and refers to five general groupings of Defendants. The first group is the Entity Defendants, Pfizer and Pharmacia (the "Entity Defendants" or "Pfizer" or "Pharmacia"). (Compl. ¶¶ 36, 52.) The second group, the Director Defendants, is comprised of Pfizer's Board of Directors and Pharmacia's Board of Directors during the Class Period (collectively the "Director Defendants"). (Compl. ¶¶ 18, 24.) The third group, the Committee Defendants, consists of the Pfizer Plan Committee and its members, as well as the Pharmacia employee benefit plan administrative and/or investment committees and their members, during the Class Period (the "Committee Defendants"). (Compl. ¶¶ 21, 26, 27.) The fourth and fifth groups are, respectively, the Pfizer Defendants and Pharmacia Defendants. The Pfizer Defendants include Pfizer, the Pfizer Director Defendants, the Pfizer Committee Defendants, and the Pfizer Leadership Team. (Compl. ¶¶ 16, 17.) The Pharmacia Defendants are comprised of Pharmacia, the Pharmacia Director Defendants, and the Pharmacia Committee Defendants. (Compl. ¶ 23.)

The Plans

"The Plans at issue are all 'employee pension benefit plan[s]' within the meaning of ERISA § 3(2)(A), 29 U.S.C. § 1002(2)(A)." (Compl. ¶ 69.) These Plans include "eligible individual account plan[s]" ("EIAPs") as defined in Section 407(d)(3) of ERISA, 29 U.S.C. § 1107(d)(3), as well as "qualified cash or deferred arrangement[s]" under section 401(k) of the Internal Revenue Code. 26 U.S.C. § 401(k); (Compl. ¶ 69.) Each of the Plans was established and maintained through a written instrument, and each featured investment in Pfizer and/or Pharmacia securities ("Company Stock") through participant contributions, an employer matching component, or both. (Compl. ¶¶ 70, 71;see also id. ¶¶ 81, 82, 102, 103, 113, 132, 146, 173, 190, 191, 201, 202, 217 (describing the investments the plans offered, and noting that each plan offered investment in a Company Stock fund); id. ¶¶ 83, 103, 115, 134, 147, 174, 192, 202 (stating that employer contributions were invested in Company Stock).) None of the plans was designed to invest primarily in employer securities, such as in an employee stock ownership plan ("ESOP"). (Compl. ¶ 73.) Many of the Plans offered an investment option in a fund that was invested primarily or generally in Company Stock ("Company Stock Funds"). (See Compl. ¶ 14 ("'Company Stock Fund(s)' means an investment that invests primarily in Company Stock."); see e.g., ¶ 81 (Pfizer Savings and Investment Plan ("PSIP") included Company Stock Fund option); ¶ 103 (Pfizer Savings and Investment Plan for Employees Resident in Puerto Rico ("PSIP-PR") included Company Stock Fund option); ¶ 113 (Pfizer Savings Plan ("PSP") included Company Stock and Company Stock Fund options); ¶ 132 (Pfizer Savings Plan for Employees Resident in Puerto Rico ("PSP-PR") included Company Stock Fund option); ¶¶ 139, 146, 148 (relating to Warner-Lambert Savings and Stock Plan ("W-L Plan") and Warner-Lambert Savings and Stock Plan for Colleagues in Puerto Rico ("W-L PR Plan") Employee Stock Funds and Company Stock Funds); ¶ 173 (Pfizer Common Stock Fund or Common Stock Investment Account); in Pharmacia Savings Plan ¶ 174 (Pharmacia Savings Plan Company Matching Account); ¶¶ 185, 190 (Searle Puerto Rico Savings Plan ("Searle Plan") Company Stock Fund); ¶¶ 200 -201 (Pharmacia & Upjohn Savings Plan Company Stock Fund ("P & U Common Stock Fund")); ¶¶ 206-208 (Company Stock Fund for Pharmacia common stock); ¶¶ 217-218 (Searle/Monsanto Puerto Rico Plan Company Stock investments). Even those plans that purported to qualify as ESOPs failed to satisfy all of the statutory and regulatory mandates with respect to plan design and/or operation. (See, e.g., Compl. ¶ 198 ("The Pharmacia Savings Plan did not purport to be an ESOP, but claimed to have an ESOP component. However, [it]... was not intended to invest primarily in Company Stock and also failed to comply, with the multiple statutory and regulatory requirements necessary to qualify as a true ESOP.")

Allegations of Misconduct

Plaintiffs allege that Defendants were aware that investment in Company Stock was imprudent and that the price of Pfizer's stock was artificially high because two of Pfizer's drugs, Celebrex and Bextra, presented cardiovascular and gastrointestinal risks of which the market was unaware. Plaintiffs cite medical studies conducted between 1999 and 2006 that allegedly revealed significant risks posed by Celebrex and Bextra. (Compl. ¶¶ 329-382.) Plaintiffs further allege that Defendants did not publicly disclose the results of many of these studies until years later and that, in some instances, they deliberately concealed or presented misleading information about the data. (Seee.g., Compl. ¶¶ 331, 338-339, 346, 359, 368, 374-375 (describing various studies conducted on Bextra and Celebrex and alleging that Defendants failed to disclose their results).) On December 10, 2004, the Federal Food and Drug Administration (the "FDA"), approved a new label for Bextra with a "black box" warning concerning cardiovascular risks for certain patients and, on December 17, 2004, the Company's stock "dropped precipitously, losing over 11% of its value."*fn3 (Compl. ¶¶ 349, 403.) By January 24, 2005, public calls were issued to remove Celebrex and Bextra from the market. (Compl. ¶ 357.) On April 7, 2005, Pfizer agreed at the FDA's urging to insert a black box warning in Celebrex's label and publicly announced that the FDA had directed it to remove Bextra from the market.

(Compl. ¶¶ 387, 391.) Because the vast majority of the Plans' assets were invested in Company Stock, their investments lost approximately 24% of their value when negative information about Celebrex and Bextra became public; the Plans ultimately lost hundreds of millions of dollars as a result of imprudent investments by Defendants in the Company Stock and Company Stock Funds during the Class Period. (Compl. ¶¶ 289, 406.) Pfizer recorded charges of $1.2 billion in 2005 in connection with its removal of Bextra from the market. (Compl. ¶ 397.)

Claims Asserted

Plaintiffs assert the following claims: breach by the Entity Defendants, Pfizer (Count I) and Pharmacia (Count V) of the ERISA fiduciary duties to monitor, prudently invest plan assets, and communicate; breach by the Pfizer Director Defendants (Count II) and the Pharmacia Director Defendants (Count VI) of the ERISA fiduciary duties to monitor and communicate; by the Pfizer Committee Defendants (Count III) and the Pharmacia Committee Defendants (Count VII) of the ERISA fiduciary duties to prudently invest plan assets and communicate; and for co-fiduciary liability on the part of the Pfizer Defendants (Count IV) and the Pharmacia Defendants (Count VIII). Plaintiffs claim that the ERISA fiduciary Defendants breached their duty of loyalty by failing to take appropriate measures to resolve conflicts of interest (Counts I-III; and Counts V-VII). Plaintiffs assert claims for co-fiduciary liability against all Defendants pursuant to ERISA § 405, 29 U.S.C. § 1105 (Counts I-III; and Counts V-VII).


Motion to Dismiss for Lack of Standing

In order to have standing to assert an ERISA claim pursuant to 29 U.S.C. §§ 1132(a)(2) & (a)(3) a plaintiff, other than the Secretary of Labor, must be a participant, a beneficiary, or a fiduciary of an ERISA-covered employee benefit plan. See Coan v. Kaufman, 457 F.3d 250, 255 (2d Cir. 2006). According to the Second Circuit, "this list is exclusive." Donahue v. Teamsters Local 282 Welfare, Pension, Annuity, Job Training and Vacation and Sick Leave Trust Funds, 12 F. Supp. 2d 273, 278-279 (E.D.N.Y. 1998) (citing Pressroom Unions-Printers League Income Sec. Fund v. Cont'l Assurance Co., 700 F.2d 889, 892 (2d Cir. 1983) ("We therefore decline to construe § 1132(d)(1) as sub silentio conferring jurisdiction over actions brought by parties other than those specified in § 1132(e)(1).")). A participant is defined as "any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan... or whose beneficiaries may be eligible to receive any such benefit." 29 U.S.C.A. § 1002(7) (West 1999). The Supreme Court has construed § 1002(7) to also encompass any former employee with "a colorable claim that (1) he or she will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the future." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117-118 (1989) (internal quotations omitted). Plaintiffs note that the Second Circuit applies the Firestonestandard flexibly to define "participant" and argue that plaintiffs have standing if they are "within the zone of interests ERISA was intended to protect." (Pls.' Opp'n to Defs.' Mot. to Dismiss the CCAC ("Pls.' Opp'n"), at 50 (quoting Mullins v. Pfizer, Inc., 23 F.3d 663, 664, 668 (2d Cir. 1994) (finding that a former employee who alleged that he voluntarily retired as a result of affirmative material misrepresentations by an employee benefits plan administrator had standing to sue (internal quotations omitted).)

Defendants originally challenged the CCAC, arguing that the named Plaintiffs lacked standing as to the Pharmacia, Warner-Lambert, Pfizer PSIP plans, and as well as the plans maintained for all employees in Puerto Rico, including the PSIP-PR, PSP-PR, W-L PR, and Searle/Monsanto Puerto Rico Plans (collectively the "Puerto Rico Plans"), and asserted that their claims must be dismissed pursuant to Fed. R. Civ. P. 12(b)(1) in so far as they relate to those Plans. (Mem. of Law in Supp. of Defs.' Mot. to Dismiss the CCAC ("Defs.' Mem."), at 48-49.) The Complaint adds a Plaintiff, Vincent Romano, who is a participant in the Pharmacia Savings Plan. (Compl. ¶ 35.) Accordingly, Defendants now concede that any standing as to the Pharmacia Savings Plan is moot and they have also withdrawn their contention with respect to the U.S. Pfizer and Warner-Lambert Plans. (See Order and Stip., Sept. 29, 2008; Defs'. Ltr. dated Aug. 1, 2007, attached as Ex. D to Defs.' & Pls. Joint Addendum, dated June 6, 2008 ("Defs.' Ltr."), at 2.) Noting, however, that none of the named Plaintiffs is alleged to have participated in any of the Puerto Rico Plans, Defendants contend that the Complaint must be dismissed with respect to those Plans because Plaintiffs lack ERISA standing to assert standing to assert claims regarding those Plans. (See Defs.' Mem. at 49, 51; Order and Stip., Sept. 29, 2008; Defs.' Ltr. at 2.)

Plaintiffs do not contend that any named Plaintiffs are participants in the Puerto Rico Plans. Rather, citing Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 422-424 (6th Cir. 1998), they argue that standing is present where the plans to which plaintiffs have no connection are similar to ERISA plans in which they do participate, when the claims asserted are similar. (Pls.' Opp'n at 47.) In Fallick, the Sixth Circuit concluded that "whether a plaintiff will be able to represent the putative class... depends solely on whether he is able to meet the additional criteria encompassed in Rule 23 of the Federal Rules of Civil Procedure" and, provided that an "ERISA class representative establishes his individual standing... [with respect to] his own ERISA-governed plan,... no additional constitutional standing requirement" needs to be met in order for him to represent the other putative class members. Fallick, 162 F. 3d at 423-424. Plaintiffs' resort to Fallick is unavailing because that case concerned a single benefit administration policy that had been applied identically to all of the employer's plans. See id. at 423. Here, the Plan provisions at issue regarding Company stock holdings are different, and Plaintiffs' claims relate to actions or omissions within the contexts of separate Plans. Thus, even if it were appropriate to apply Fallick's principle in this Circuit, its requisites are not met here.

The Court finds that Plaintiffs lack standing to pursue their claims regarding the Puerto Rico Plans, as none of the Plaintiffs is alleged to have been a participant in any of the Puerto Rico Plans. Accordingly, Plaintiffs' claims are dismissed without prejudice pursuant to Rule 12(b)(1) insofar as they are asserted with respect to the Puerto Rico Plans.

Motion to Dismiss for Failure to State a Claim

In deciding a motion pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss a complaint for failure to state a claim, the Court must "accept as true all factual statements alleged in the complaint and draw all reasonable inferences in favor of the non-moving party." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007) (citation omitted). "[T]he issue is whether the [plaintiff] is entitled to offer evidence to support the claims." Hudson Valley Black Press v. Internal Revenue Service, 307 F. Supp. 2d 543, 545 (S.D.N.Y. 2004) (internal citation and quotation marks omitted). Nonetheless, "[f]actual allegations must be enough to raise a right to relief above the speculative level...." Bell Atlantic Corp. v. Twombly, U.S. 550 U.S. 544, ___, 127 S.Ct. 1955, 1965 (2007) (requiring plaintiff to plead "enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of [his claim]");seealsoATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).

There are no specialized or heightened pleading rules for ERISA actions. Rather, ERISA actions are subject to the general notice pleading standard contained in Rule 8 of the Federal Rules of Civil Procedure, which requires "a short and plain statement of the claim showing that the pleader is entitled to relief...." Fed. R. Civ. P. 8(a)(2); In re WorldCom Inc. ERISA Litig., Inc., 263 F. Supp. 2d 745, 759-60 (S.D.N.Y. 2003) (quoting Swierkiewicz v. Sorema, N.A., 534 U.S. 506, 513 (2002)).

Fiduciary Status Under ERISA

Defendants primarily assert that the Complaint should be dismissed as against Pfizer and Pharmacia because Plaintiffs' allegations are insufficient to support relevant fiduciary status, that the Director Defendants did not have relevant fiduciary duties, and that all of the Defendants are shielded from liability arising from losses incurred in Company Stock investments by a presumption that such ...

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